Re: Keynes and competition

["Kazuhiro Kurose" <kurose@xxxxxxxxxxxxxxxxxxxxxx>]

> I think one needs to remember that although the demand curve for the firm
is
> horizontal, the demand curve of the industry is not.  Thus, it is not the
> demand for the output of a small company, which is insignificant seen
> against the whole, that is relevant, but the industry demand.  In
addition,
> the company would not want to produce more than the quantity determined by
> the point where his marginal revenue and cost are equal.  Thus, even if
the
> company could expect to sell everything it produces at the going market
> price, it would not want to.

I used the term "individual demand curve" to express that individual firms
(capitalists) expect the demand for goods produced by themselves. In perfect
competition, therefore, individual demand curve is flat because they expect
that they could sell as much goods as they want. And I would like hereafter
to use the term "market demand curve"to express the behavior of consumers in
a single market. In normal case, therefore, the curve is downward sloping.
The co-existence of vertical individual demand curve and downward sloping
market demand curve has no contradiction only if the equality of supply and
demand is held in the market. Unless the equality is held, individual demand
curve must be also downward sloping. Therefore, we must move into the
imperfect competition world, as soon as the disequilibrium arises in the
market. Even if market demand curve is downward sloping in perfect
competition world, it is absolutely sure for individual firms to able to
sell the goods however they want. In imperfect competition world, however,
where individual demand curve is downward sloping as well as maket demand
curve, individual firms couldn't expect that the could sell the goods
however they want. In other words, they have the demand constraint.