ABSTRACT
The theory of the determination of the price and output of goods supplied in the market has been developed from a number of simple assumptions about the motivation of the firm and the conditions of production, through the theories of production and costs, to the theory of supply under specific market conditions. The concept of the market clearly is closely connected with received theory’s development. Free markets are relatively efficient in handling the vast amounts of information which are necessary to the working of an advanced economy. The chapter also examines a number of important social and economic problems and illustrates the usefulness of the supply-demand model. One policy measure which was extensively utilised in the United Kingdom – and in many other countries – was that of rent control. Rent control introduced a ceiling level of rent above which rents were not allowed to rise; this level was generally below the market level.
