CHAPTER 5

EXPECTATION AS DETERMINING OUTPUT ANDEMPLOYMENT

I

ALL production is for the purpose of ultimately satis-fying a consumer. Time usually elapses, however—and sometimes much time—between the incurring ofcosts by the producer (with the consumer in view) andthe purchase of the output by the ultimate consumer.Meanwhile the entrepreneur (including both the pro-ducer and the investor in this description) has to formthe best expectations1 he can as to what the consumerswill be prepared to pay when he is ready to supplythem (directly or indirectly) after the elapse of whatmay be a lengthy period; and he has no choice but tobe guided by these expectations, if he is to produce atall by processes which occupy time.

These expectations, upon which business decisionsdepend, fall into two groups, certain individuals or firmsbeing specialised in the business of framing the firsttype of expectation and others in the business of framingthe second. The first type is concerned with the pricewhich a manufacturer can expect to get for his “finished”output at the time when he commits himself to startingthe process which will produce it; output being “finished”(from the point of view of the manufacturer) when it isready to be used or to be sold to a second party. The

1 For the method of arriving at an equivalent of these expectations interms of sale-proceeds see footnote (3) to p. 24 above.

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