ABSTRACT
We have now considered what goes on in the Shops when given streams of money incomes meet given flows of various products on to the market. We explained at the beginning of the last chapter (p. 54) that we were neglecting the effect of price changes in the Shops upon what went on in the Firms and Farms; and we explained that in fact there were two sets of influences in the Firms and Farms which might have repercussions in turn upon the market for finished products in the Shops. For, first, a change in product prices might affect the supplies of X, Y, and Z produced in the Firms and Farms for the Shops; and, second, this might cause a change in the demand for various factors of production and thus in the relative earnings of various citizens and so in the personal distribution of the fixed national money income between the individual consumers. In this chapter we shall construct and discuss a set of assumptions about what goes on in the Firms and Farms which will enable us to continue with our assumption that the supplies of the products X, Y, and Z are unaffected by changes in the prices of X, Y, and Z but to drop the assumption that such price changes have no effect upon the distribution of incomes.
