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The Producer Theory

In: MICROECONOMICS with SPREADSHEETS

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  • Suren Basov

Abstract

In this chapter, we discuss the producer theory. While the consumer theory discussed in the previous chapter provided us with the mechanism of formation of the demand, the producer theory aims at explaining the origins of supply. The basic production unit in an economy is called a firm. For the purposes of this chapter, the internal structure of the firm is considered to be a black box and the firm is identified with its technology captured by the production function. Firms are simply assumed to choose production plans to maximize profits, taking both input and output prices as given. These profit maximizing plans give rise to the supply function, which maps the output prices into production decisions…

Suggested Citation

  • Suren Basov, 2017. "The Producer Theory," World Scientific Book Chapters, in: MICROECONOMICS with SPREADSHEETS, chapter 3, pages 39-50, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813143968_0003
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    Keywords

    Microeconomics; Game Theory; Producer Theory; Consumer Theory; Economics of Information; Basics of Industrial Organization; Excel; The Solver;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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