Producer behavior

Producers, like consumers, play a central role in economic models. A consumer can trade goods, changing the distribution of goods among the agents in the economy. A producer can change the availability of goods, transforming inputs, which may be physical goods, like raw materials, or mental resources, like information and attention, into outputs. This chapter considers a producer who acts as if her behavior has no effect on the prices of the input or output. It is argued that this assumption may be appropriate if the producer’s quantities of inputs and output are small relative to the total volume of trade in the markets.