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Questions and Answers
Which economist published 'Principles of political economy' in 1848?
Which economist published 'Principles of political economy' in 1848?
What is the main belief of the laissez-faire approach towards markets?
What is the main belief of the laissez-faire approach towards markets?
Which theory states that price is primarily determined by the labor and cost of production put into a product?
Which theory states that price is primarily determined by the labor and cost of production put into a product?
Who proposed the concept of 'utils' to measure the mathematical pleasure or satisfaction derived from a product?
Who proposed the concept of 'utils' to measure the mathematical pleasure or satisfaction derived from a product?
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What differentiates the Marginalist School from the classical school of economics?
What differentiates the Marginalist School from the classical school of economics?
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Which economist popularized the concept of Marginalism in 1890?
Which economist popularized the concept of Marginalism in 1890?
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What is the main focus of the Neoclassical School of economic thought?
What is the main focus of the Neoclassical School of economic thought?
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Which concept is used to determine how much of an item consumers are willing to purchase?
Which concept is used to determine how much of an item consumers are willing to purchase?
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What concept is still used today to determine the production quantity where a company maximizes its profits?
What concept is still used today to determine the production quantity where a company maximizes its profits?
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Which economist published 'Principles of Economics' in 1890, integrating supply and demand, marginal utility, and costs of production?
Which economist published 'Principles of Economics' in 1890, integrating supply and demand, marginal utility, and costs of production?
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According to the Neoclassical School, what plays a central role in influencing the value of products or services?
According to the Neoclassical School, what plays a central role in influencing the value of products or services?
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Who is known for positing the concept of the 'Invisible Hand' in economics?
Who is known for positing the concept of the 'Invisible Hand' in economics?
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Which economist is famously associated with the Labor Theory of Value?
Which economist is famously associated with the Labor Theory of Value?
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According to Thomas Robert Malthus, what will happen when population growth exceeds food supply?
According to Thomas Robert Malthus, what will happen when population growth exceeds food supply?
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Which economist's theory laid the foundation for free trade policy with his theory on rent?
Which economist's theory laid the foundation for free trade policy with his theory on rent?
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Who is considered the 'Father of Economics' and emphasized division of labor as crucial for economic growth?
Who is considered the 'Father of Economics' and emphasized division of labor as crucial for economic growth?
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Which school of economic thought focuses on how to manage resources to meet needs and wants?
Which school of economic thought focuses on how to manage resources to meet needs and wants?
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Study Notes
Market and Government Role
- Markets work best when left alone, with a minimal role for government, following a laissez-faire approach.
- The efficiency of free markets is believed to generate economic development.
Marginalist School
- John Stuart Mill published "Principles of Political Economy" in 1848 and "Utilitarianism" in 1861.
- He introduced the concept of "utility" including pleasures of the imagination and gratification of higher emotions.
- Later, Carl Menger, Alfred Marshall, and Leon Walras developed the measurement of "utils" (mathematical pleasure or satisfaction).
Labor Theory of Value vs. Subjective Theory of Value
- Labor Theory of Value: no relationship between price and utility, price is a factor of labor and cost of production (Adam Smith and Co.).
- Subjective Theory of Value: value in use and value in exchange, the utility of something is reflected in how much you are willing to pay for it (William Stanley Jevons, Léon Walras, and Carl Menger).
Marginalism
- Popularized by Alfred Marshall in 1890, the concept of "economists think at the margin" and studying "choices" at the margin.
- Marginal analysis is used to determine how much of an item consumers are willing to purchase, and to determine whether using an additional input will increase output.
- It is still used today to determine the production quantity of a company where it maximizes profits.
Neoclassical School
- A wide-ranging school of ideas from which modern economic theory evolved.
- Focus on how prices are formed and the production and distribution of income through the market mechanism of supply and demand.
- Profit maximization and maximizing satisfaction are key concepts.
Key Economists
- Alfred Marshall (England, 1842-1924) published "Principles of Economics" in 1890, bringing together ideas of supply and demand, marginal utility, and costs of production.
- Adam Smith (Scotland, 1723-1791) published "The Wealth of Nations" in 1776, introducing the concept of "Invisible Hand" and division of labor as a chief factor of economic growth.
- David Ricardo (England, 1772-1823) is known for the Labor Theory of Value, theory of Comparative Advantage, and rent theory.
- Thomas Robert Malthus (England, 1766-1834) wrote "An Essay on the Principle of Population" in 1798, questioning the "invisible hand" and predicting population growth will exceed food supply.
Classical School Key Takeaways
- The management of resources to meet our needs and wants is a key question in economics.
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Description
Test your knowledge on the principles of laissez-faire economics and the ideas of John Stuart Mill, who believed in the efficiency of free markets for economic development. Explore concepts such as utility and the role of government in markets.
