(DP 1993-05) On Keynes Aggregate Supply Function

Abstract

The usual interpretation of Keynes aggregate supply function is that it is based on the ordinary supply function where the output supplied is a function of price such that its marginal costs is equated to price. In this paper it is argued that Keynes concept is based on Marshalls supply function where the supply price is a function of quantity and the supply price is average cost including normal profit.