The basic idea

Although a dynamic analysis of the behaviour of the firm has carefully been made by Hicks, 1946, it is only concerned with its production plan. In the actual world, the production plan is only a part of the whole plan which the firm makes. It includes in addition to the production plan, the demand–supply plan of the factors of production and the products, and the inventory or stock plan of these commodities. Besides, the firm will make a demand–supply plan concerning money and securities, that is, its financial plan. The purpose of this appendix is to analyse the plans systematically by a single principle of the behaviour of the firm. Especially, the problem of the demand for money is one of the central points of interest in the following analysis.

Subjective equilibrium conditions of the firm

We use the following notation. Let yi0 be the supply of product i of the firm in the present week 0, i = 2,3,…, m; yij the expected supply of the same product in week i in the future, yj0 the demand for material, capital good or factor, j, used for production in week 0, yji the expected demand for the same good or factor in week i, j = m + 1,…, n. (Throughout the following we refer to materials, capital goods, and factors of production simply and categorically as the factors of production.) These supplies and demands may differ from outputs and inputs of these commodities actually produced or carried out in the respective weeks.