The analysis of the previous eleven chapters has been conducted almost entirely in terms of a ‘perfectly competitive’ model in which consumers and firms have been assumed to be price-takers and quantity-adjusters. That is, each firm and consumer is assumed to face a market price for inputs and outputs, that market price having been determined by the behaviour of supply and demand in the total market. Firms’ and consumers’ behaviour has then been analysed in terms of adjustments to the given prices, and the adjustments have consisted mainly of changing the quantities of inputs or goods purchased or offered for sale when prices change.
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