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.
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