The Firm

The Firm

Like the household, the firm has decisions to make that effect the economy as whole. The butcher needs to decide how much beef to produce so that there isn't an excess or a deficit of beef on the market. The butcher needs to decide at what price to sell beef in order to avoid excess or deficit beef in his stocks. In short, the butcher needs to know the demand for beef to know how much to supply at a certain price. Rational firms need to know how supply and demand interact. [JP] {PM}