To illustrate this notion of "supply to a firm," consider the production of Quadra 9000 computers by the innovative folks at Quadra DG Computer Works. Standard operating procedure for Quadra DG Computer Works is to produce Quadra 9000 computers according to the standard principles of production and cost (law of diminishing marginal returns, profit-maximization, etc.). It then supplies these computers to consumers, like Duncan Thurly, residing in households all over the economy, through product markets (stores, mail order, etc.). Quadra DG Computer Works does the supplying of Quadra 9000 computers and the relevant phrase is "supply by a firm."

The phrase "supply by a firm" is also relevant if Quadra DG Computer Works supplies Quadra 9000 computers as capital goods rather than consumer goods. When Quadra 9000 computers are used as capital goods and they are considered a factor of production. For example, Quadra 9000 computers are an important productive factor for cellular telephone communication services offered by Digital Distance Wireless Telecommunications.

The phrase "supply to a firm," however, is relevant from the other side of this computer market. From the viewpoint of Digital Distance Wireless Telecommunications, computers are being supplied TO, not FROM. They are the buyers in this factor market. This supply to a firm involves the "supply" of Quadra 9000 computers, with the "to a firm" being Digital Distance Wireless Telecommunications.

The distinction between "supply to a firm" and "supply by a firm" is particularly important in terms of market control. For a perfectly competitive buyer, "supply to a firm" is a perfectly elastic, horizontal supply curve. For a monopsony, in which the buyer has complete control over the buying-side of the market, then the supply to a firm is the overall market supply which is typically a positively-sloped curve. For imperfectly competitive firms, including oligopsony and monopsonistic competition, supply to a firm is corresponding portions of the overall market supply.