ABSTRACT
The allocation of demand between broad categories of expenditure is probably not greatly influenced by relative prices, given the same income level. But within each of these groups are subgroups, and subgroups within subgroups, and the narrower the group the more prices are likely to influence the composition of quantity signals. It is through direct or indirect price-advantages that new commodities manage to displace existing ones. This method of resource allocation presupposes that production in general is demand-constrained and not resource-constrained. The main attraction of monetarism was not its intellectual simplicity, inflation is a matter of the money supply, period but that it elevated the fear of inflation to the unique position which could not be justified by the experience of numerous countries who habitually suffer from it. The highcost firm can compete effectively with the low-cost firm because its inefficiency is not reflected in its prices, only in its profits.
