The inventory control problem and the optimal supply price: Micro theoretic

The inventory control system of firm operating under Marshallian market conditions is developed as part of an optimal production planning problem. The control process is analyzed through the differences between the paths of supply and demand prices that lead to variations in the path of unplanned inventory accumulation. From the solution to the optimal production plan problem, the supply price is computed as a shadow price of output from the shadow prices of the inputs. The production planning problem is formulated and embodied and disembodied technological parameters. The firm’s inventory control system is then analyzed from the conditions of its internal cost, market power and changes in demand relative to capacity.