44 THE GENERAL THEORY OF EMPLOYMENT BK. II

It follows that we shall measure changes in currentoutput by reference to the number of hours’ labour paidfor (whether to satisfy consumers or to produce freshcapital equipment) on the existing capital equipment,hours of skilled labour being weighted in proportion totheir remuneration. We have no need of a quantitativecomparison between this output and the output whichwould result from associating a different set of workerswith a different capital equipment. To predict howentrepreneurs possessing a given equipment will re-spond to a shift in the aggregate demand function it isnot necessary to know how the quantity of the result-ing output, the standard of life and the general level ofprices would compare with what they were at a differentdate or in another country.

IV

It is easily shown that the conditions of supply, suchas are usually expressed in terms of the supply curve,and the elasticity of supply relating output to price,can be handled in terms of our two chosen units bymeans of the aggregate supply function, without refer-ence to quantities of output, whether we are concernedwith a particular firm or industry or with economicactivity as a whole. For the aggregate supply functionfor a given firm (and similarly for a given industry orfor industry as a whole) is given by

Zr = ϕr (Nr),

where Z r is the proceeds (net of user cost), the expecta-tion of which will induce a level of employment Nr .If, therefore, the relation between employment andoutput is such that an employment Nr results in anoutput Or , where Or = ψr(Nr), it follows that p = Zr +Ur (Nr) ϕr(Nr ) + Ur (Nr )

Or ψr(N)

is the ordinary supply curve, where Ur (Nr ) is the (ex-