In this paper, a theoretical model of the price versus quantity adjustment of the firm is developed. The model is characterized by short-run capacity constraints, uncertainty about demand and imperfect competition on the product market. The microeconomic model is complemented by aggregation over firms. The aggregate model exemplifies the prominent role of capacity utilization as business cycle indicator and yields a variant of an accelerator model for the capacity adjustment. The demand and cost multipliers depend on the share of capacity constrained firms, and the price adjustment is determined by unit labour costs, capacity utilization and competition.