ABSTRACT
A simple post Keynesian aggregate demand and supply framework allows both supply and demand factors to be incorporated into the manufacturing sector of Ecesis. This chapter describes the determination of output and prices in the Ecesis model. It provides a spatial competition theory and its implied assumptions. The plausibility of the various sets of assumptions and a case is made for a particular version of the spatial model. The chapter discusses the spatial model into an aggregate supply and demand framework. It also describes the specifications and estimations in Ecesis. The chapter presents the specification and estimation results of the state level consumer price index equations. The assumptions of uniform mill prices, constant per distance transport costs, varying cost structures and product differentiation, on the other hand, are quite reasonable. Large variations in output and employment create organizational and administrative problems for firms; thus prices are 'administered' to create some stability in an otherwise whimsical market place.
