Price Behavior in the Manufacturing Sector for Sixteen Industries Classified by Stage-of-Process

One major finding of this paper is that prices in most basic materials producing industries are responsive to demand while prices in most finished goods producing industries are not. If the reverse were true, stabilization policies would. have more effect in the short run on prices and less effect on output than is currently the case. A second finding relates to the 1971-4 period of wage and price controls and the period immediately following their termination. During controls, prices in most manufacturing sectors did rise somewhat slower than their historical relationship to costs would suggest. But after controls ended prices rose relative to costs by considerably more than the amount of their shortfall during controls. This suggests that some fundamental change in price-cost relationships may have taken place in 1974.