The author, Sir John Hicks, sets out in this opening section his goal for the chapter, which is "to bring out a certain parallelism which exists between the case of the firm and that of the private person." By doing so, he intends "to extend the theory of exchange set out in the last chapter to take account of production as well."
In the previous chapter Hicks assumed that an individual consumer, having come into the market with some collection of commodities or services, could only obtain other ones by means of exchange. Now he will allow the possibility that sometimes they can generate new commodities through production -- a process of technical transformation of a set of inputs into a set of outputs. An opportunity to undertake such a transformation will be chosen only if the set of goods generated has a higher value than the set consumed in the transformation. Changes in market conditions can result in changes in the set of production opportunities that are profitable. In addition, the set of individuals who can take advantage of these opportunities may change.
In general, an entrepreneur will acquire services that are factors of production and will do so "not because he has any direct desire for them, but because he needs them for the full exploitation of his productive opportunities." The production that is enabled by these factors will determine the amounts of factors employed. The enterprise that converts the factors into products may be regarded as an economic unit, operating completely separately from the private account of the entrepreneur. "It acquires factors and sells products; its aim is to maximize the difference between their value."
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