ABSTRACT
The models need to be broadly consistent with the empirical evidence and with non-neo-classical theorising in the areas of industrial and labour economics as appropriate. A basic distinction is made in elementary micro-economics between markets in which firms are price-makers and those in which firms are price-takers, which comes quite close to the distinction made by Michal Kalecki between cost-determined and demand-determined prices. The chapter deals with a consideration of firms’ price and investment decisions in an oligopolistic environment. It explores different approaches to price-making behaviour, with a view to arriving at a common equation for use in macro-economic models which incorporates varying approaches as particular cases. The macro-economic theory which involves the use of such an approach to pricing is specific to a capitalist economy. Net investment relies on growth, and unless the economy continues to expand net investment falls away.
