Assertion (A): The market supply curve of a good shifts to the right when more firms enter the market.
Reason (R): The market supply at any price is the sum of the quantities that the individual firms supply at that price.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Market supply is the sum of the supplies of all the firms at each price. More firms means more quantities are added at every price.
Assertion (A): The market supply curve of a good shifts to the right when more firms enter the market. — True. With more firms, a larger total quantity is supplied at every price.
Reason (R): The market supply at any price is the sum of the quantities that the individual firms supply at that price. — True. This is how the market supply curve is built: by a horizontal summation of the firms’ supply curves.
Why R explains A?
If the market supply at a price is a sum over the firms, then adding firms adds more terms to that sum. The total at each price becomes larger, so the whole curve shifts to the right.
NCERT (2026-27): “4.6 Market Supply Curve … Consider a market with n firms: firm 1, firm 2, firm 3, and so on. Suppose the market price is fixed at p. Then, the output produced by the n firms in aggregate is [supply of firm 1 at price p] + [supply of firm 2 at price p] + ... + [supply of firm n at price p]. In other words, the market supply at price p is the summation of the supplies of individual firms at that price.” “… It should be noted that the market supply curve has been derived for a fixed number of firms in the market. As the number of firms changes, the market supply curve shifts as well. Specifically, if the number of firms in the market increases (decreases), the market supply curve shifts to the right (left).” |