The Law of Decreasing Costs

  • Roy Harrod


In a former article I made an attempt to analyse the conditions of equilibrium in the long and short periods with reference to marginal prime, average prime and supplementary costs. Two classes of case were considered, first that of pure competition, and secondly that in which ‘the source of supply is not small in relation to the whole industry’. It was maintained that in the second case the volume of output is determined by the intersection of the marginal prime cost curve and a curve derived from the demand curve which I called the increment of aggregate demand curve, and that the law of decreasing costs might then prevail in the long and short periods.


Marginal Cost Demand Curve Competitive Equilibrium Cost Curve Prime Cost 
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Copyright information

© Roy Harrod 1972

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  • Roy Harrod

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