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This paper provides a reconciliation of the Marshallian and Slutsky theories of demand. Incidentally, it also demonstrates that vertically parallel indifference curves involve unitary price elasticity and clarifies Marshall's analysis of consumer's surplus.In Figure 1 the consumer is assumed to be initially in equilibrium at A, where he purchases OA′ of X (a composite commodity) at a price of P, as indicated by price line FA, and devotes OM of his given money income to all uses, Y, other than expenditures on X. Thus Y represents dollars spent on all uses other than X. The price of X is then allowed to decrease to (P − ΔP) as indicated by price line FB and the quantity of X increases to (X + ΔX), or to OB′, while the price of Y remains constant at unity, and the quantity of Y decreases to ON. Since the consumer's money income remains constant, any change in the total amount spent on X must produce an equal and an opposite change in the total amount spent on all other goods. The change in the total amount spent on all other goods is defined as the difference between the amount spent on X in the initial position at A and that spent on X in the new position at B, or as:.

In the controversy between Professor Chamberlin and Mrs. Robinson and their respective supporters concerning what Professor Chamberlin calls "monopolistic competition," and Mrs. Robinson has named "imperfect competition," neither side seems ever to have referred to Marshall's Industry and Trade. In the field of history of economic doctrines and analysis, only three writers seem to have given serious attention to the work. Two of these wrote before the publication of either The Theory of Monopolistic Competition, or The Economics of Imperfect Competition. The other, though he comes to the conclusion at which this paper also arrives, fails to mention a number of notions presented by Marshall in his analysis of markets under conditions less than perfectly competitive.Industry and Trade is not mentioned in the report of the "Round Table on Monopolistic Competition" found in the American Economic Review of June, 1937. In addition—chronologically this series of articles should be put first—no writer participating in the Economic Journal's "Symposium" of 1930 mentions Industry and Trade, while Professor Sraffa mentions it only once in the famous article which is considered by some to have been the beginning of the "revolutionary" new approach. Professor Chamberlin makes no reference to Industry and Trade either in the text of, or bibliographies to, the fifth or sixth editions of The Theory of Monopolistic Competition, and Mrs. Robinson cites Industry and Trade only once, on a minor point, in The Economics of Imperfect Competition.