Alfred Marshall

Definition

Alfred Marshall was a prominent British economist known for his foundational contributions to microeconomics and welfare economics. His work laid the groundwork for the Cambridge School of Economics, influencing subsequent economists like John Maynard Keynes. Marshall's concepts of supply and demand, elasticity, and consumer surplus are essential in understanding market dynamics and have left a lasting impact on economic theory.

5 Must Know Facts For Your Next Test

1. Alfred Marshall published his influential book 'Principles of Economics' in 1890, which introduced key concepts such as supply and demand curves.
2. He developed the idea of 'elasticity' to describe how quantity demanded changes in response to price changes, significantly shaping price theory.
3. Marshall's analysis of consumer surplus provided insights into how welfare economics evaluates the benefits consumers receive from market transactions.
4. He emphasized the importance of time in economics, distinguishing between the short run and long run in his analysis of market behavior.
5. Marshall's work laid the foundation for the development of microeconomic theory and has been instrumental in shaping modern economic thought.

Review Questions

• How did Alfred Marshall's ideas on supply and demand influence the development of microeconomics?
  • Alfred Marshall's ideas on supply and demand were crucial in establishing the foundational principles of microeconomics. His introduction of supply and demand curves provided a visual representation of market interactions, allowing economists to analyze how price changes affect quantity supplied and demanded. This framework helped shape modern economic theory by enabling a better understanding of market equilibrium and price determination.
• What role did Alfred Marshall play in the Cambridge School of Economics, and how did his work impact later economists like John Maynard Keynes?
  • Alfred Marshall was a central figure in the Cambridge School of Economics, fostering an environment that emphasized rigorous economic analysis and theoretical development. His work on elasticity, consumer surplus, and welfare economics influenced later economists, particularly John Maynard Keynes. Keynes built upon Marshall's ideas while developing his own theories regarding aggregate demand and macroeconomic stability, which further advanced economic thought.
• Evaluate the significance of Marshall's concept of elasticity in contemporary economic analysis, particularly in relation to policy-making.
  • Marshall's concept of elasticity remains highly significant in contemporary economic analysis as it provides critical insights into consumer behavior and market dynamics. By evaluating how responsive consumers are to price changes, policymakers can make informed decisions regarding taxation, subsidies, and regulation. Understanding elasticity helps predict potential market reactions to policy changes, ensuring that interventions achieve desired outcomes without unintended consequences.

Related terms

Marginal Utility: The additional satisfaction or benefit gained from consuming one more unit of a good or service, crucial for understanding consumer behavior.

Elasticity: A measure of how much the quantity demanded or supplied of a good responds to changes in price, income, or other factors.

Consumer Surplus: The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit to consumers.