This chapter separately analyzes the short-run resource allocation in response to demand of an employee, a private corporation, and a private nonprofit organization. The external demands for private organizations' outputs are taken as given and a managing employee's demand for his employee's output is derived. Based on the analysis of Chapter 4, Section A derives the employer's and the employee's costs of each rate of the employee's delivered output. Section B analyzes an employee's supply behavior in response to a managing employee's demand. Sections C and D respectively analyze the supplies of private corporations and private nonprofit organizations in response to their external demands.

Costs to the employer and to the employee of the employee's delivered output and simplifying assumptions about these costs

This section applies the analysis of Chapter 4 to derive the costs to an employer and to his employee of each rate of the employee's delivered output. Although the employee might not supply part of his output to his employer or to other parties whose receipt of this output benefits his employer, I ignore such quantities (i.e., amounts put to personal use, wasted, or supplied to other parties) in order to simplify the exposition. The exposition is also facilitated by the assumption of a single output. An employee's output can either be a separate intermediate or final output or his determinate contribution to such an output.