CHAPTER 11

THE CONDITIONS OP EQUILIBRIUM

(i.) The Condition op Zero-pro pits

We have seen, in the previous chapter that, since theProfits (Q) are the difference between the value ofcurrent output and E, its cost of production, we have

Q = I — S;

so that entrepreneurs make a profit or a loss accordingas the money-value of current Investment exceeds orfalls short of current Savings.

Thus we have Profits = Value of Output - Cost ofProduction = Value of Investment - Savings ; Profitsbeing the balancing figure not only between Cost ofProduction and Value of Output, but also betweenSavings and the Value of Net Investment, both interms of money.

These Profits (whether positive or negative) aremade up of two elements, which we have called (p. 137)Qx and Q 2 , namely, C^^I'-S), which is the profiton the output of consumption-goods, and Q 2 ( =1 -1'),which is the profit on the output of investment-goods.

Now equilibrium requires that Q x , Q 2 and Qshould all be zero. For if either Q x or Q 2 is not zeroone class of entrepreneurs will have an incentiveto expand their output; and if the total profits Qare not zero, the entrepreneurs will tend, so far asthey can, to alter the total volume of employment

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