ABSTRACT
The economic plan of a firm is made up, first, of decisions about what it has to purchase for its own productive activities from other economic units, and, secondly, of decisions about sales to other economic units. The firm is, therefore, linked in two directions with other economic units: on the one side it is a demander of labour and material factors of production from households and other firms; and on the other side it is a supplier of the products which are produced by its particular combination of labour and material factors of production, and which are in turn demanded by households and other firms. We now have to examine this part of the process of production as it takes place within the firm, and the forces motivating it. We have to ask what determines the kind and quantity of purchases which the firm makes from other economic units, and the kind and quantity of sales it makes to other economic units.
