chapter  19
5 Pages

CHANGES OP COSTS AND THE COMPUTATION OF UTILITY

Under all conditions changes of cost bring about changes of price. It is this fact which is largely responsible for the opinion that prices are chiefly responsible for costs, an opinion that is widely held in business circles and has thus been communicated to theorists. As a matter of fact this is not an immediate relationship. Costs, and consequently their changes, can only affect prices in so far as these factors influence the computation of utility. Therefore the effect on prices of changes in costs can only be understood when one comprehends their influence on the computation of utility.