The theory of firm and pricing which we are concerned in this aspect is primarily an analysis of equilibrium of the firm and industry under various market forms. When different firms are producing differentiated products, it is difficult to define an industry and the analysis of equilibrium of the industry under such conditions is full of conceptual difficulties. When different firms are producing diffferentiated products, each would have its separate demand and supply of its particular product. Therefore, in this case we cannot sum up the demand and supply of the various firms producing differentiated products to obtain the supply and the demand for the industry. It was in connection with the industry composed of various firms producing homogeneous, undifferentiated products that the concepts of supply and demand were forged by Marshall.
When various firms are producing same or homogeneous products, it is possible to identify an industry and the supply and the demand for the product of that industry can be ascertained. But when different firms are producing differentiated (but similar) products, it is not easy to identify an industry having its own supply and demand. Prof. Chamberlin in his concept of monopolisitc competition where various firms produce differentiated but similar product has called the collection of these firms as group rather than industry. Moreover, it is because of this difficulty or viewing supply and demand for group of firms producing differentiated products and also because of greater importance of behaviour of individual firms having control over their own products that in recent years emphasis has been shifted from the equilibrium from the equilibrium of the industry to the equilibrium of the firm. However, equilibrium of the industry under conditions of perfect competition, where various firms produce homogeneous products, retains its importance and usefulness.