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Demand Demand-Supply-SupplyShift.gif pg-8

So far, we have been looking at the supply curves of a individual firms, but we often want to consider the combined supply of all the firms in a particular industry, or put another way, all the different suppliers of a particular good or service. When products gain popularity and become more profitable to produce, new firms to enter the industry. As more suppliers produce a particular good, more is supplied at every market price, so the market supply curve shifts out due to the increased number of firms.

In the chapter on Perfect Competition, we will examine this kind of supply shift in detail. For now, it's sufficient to know that the market supply will shift out when more firms enter an industry and begin producing a product, and supply will shift back when firms leave an industry, or go out of business so that fewer firms are producing the good or service.

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