Abstract
The previous chapter took a close look at demand theory and estimation, on the grounds that decision-making requires careful consideration of the likely benefits of any action, usually expressed in terms of revenue. The other side of the decision equation is evaluation of the costs of an action, to which the benefits can be compared. It is to the costs that we now turn, using as a starting point the economic analysis of production. The primary activity of any commercial organisation is the transformation of inputs into outputs. It is this transformation process that now concerns us. In a general sense ‘production includes all economic activity, other than ultimate consumption’.1
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