ABSTRACT
The subject matter of this chapter falls within the broad province of the theory of the firm. We are concerned with the immediate determinants of the individual prices that constitute the general price level
In facing the problems of price determination and price policy in the context of general price level analysis we run into several kinds of difficulty. It is customary within the theory of the firm to set up a series of analyses of alternative market situations. We distinguish
onditions which produce perfectly competitive ; or monopolistic markets of some degree or other. In any
my, a variety of market situations are likely to
any perfectly general way. A further difficulty arises in connexion with conv
of firm behaviour. In most textbook cases the analysis takes under conditions of static expectations, and the formal s lose much of their precision when faced with dynamic reality in ^ expectations become significant and uncertainty is the rule rather than the exception. Since we are conccrned with the process of inflation in which expectations may play an important role static textbook theories offer only a limited foundation on which to price level analysis.