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An Application of Activity Analysis to the Theory of the Firm

M. J. Farrell

Abstract

This paper considers the problem of determining an optimal price policy for a firm over a number of planning periods, taking into account the effect of its present policy on the demand curves which will confront it in the future. The possibilities of shifts, lags, and kinks in the demand functions are allowed for. A partial solution is obtained by using activity analysis, and is applied to the recent controversy between the "normal cost" and "marginal cost" pricing rules