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Transcript of Alfred Marshall
costs of production
consumer surplus 1877:
Married former student and economist, Mary Paley Alfred Marshall Biography Influences Books/Works Supply and Demand Economic Theories & Contributions Marginal Utility Partial Equilibrium Costs of Production Consumer Surplus Elasticity?? Age of Marshall Applications During 19th century Applications Today Was Marshall ahead of his time? What are some other examples of supply and demand in today’s society? Why is it important for companies to use the Marshallian cross? The End Critical Questions Economic Conditions:
England, 19th century 1st situation
- expensive, 10 CDs @ $20
- 15 people want it.
- more demand than supply
- increase price, which increases supply to 15 CDs charge at $22
- make more because people want more (supply)
- 10 get it at $20
- 5 people who didn't get it at $20 get it at $22
- 10 people get it at $15 (cause we lowered the price)
- 5 people don't get it because not enough supply. - the goal of the game is to get a CD as soon as possible, so if you have the money, you have to buy it
- new CD coming out, 10 CDs @ $20
- rich people will have $2 left over + a CD
- 5 people at $22 will have only a CD
- 10 people at $15 will get the CD 2 months later
- 5 people have nothing
- Equilibrium price is $15 because the demand equals the supply (which is 0 and 0)
- companies try to reach this point, but it is basically impossible - 15 people get $22
- 10 people get $15
- 5 people get $10
- 5 people get a card saying you don't want the CD because you hate the artist Neoclassical economist Specialized in microeconomics A measure of the surplus benefits an individual derives from his environment. Antoine Augustin Cournot John Stuart Mill Adam Smith First developed by Jules Dupuit. neoclassical: believed consumers and utility are strong influences of price
Higher the price of a good, lower the demand Higher the price of a good, the greater the supply Marshallian Cross/Scissors credited for this analogy introduced by Cournot the additional satisfaction a consumer gains from acquiring one more unit of a product/service the more glasses, the less satisfaction the study and analysis of the economy by isolating other external factors vs.
General Equilibrium takes into account all factors that are interdependent in the economy helps economists breakdown complex situations/models Market Period
change in supply by labour, but not capital
capital can increase “The forces to be dealt with are…so numerous, that it is best to take a few at a time...Thus, we begin by isolating the primary relations of supply, demand, and price.” Industrialization in 19th century led to real-life applications Dionysius Lardner: maximize profits for railroad transportation calculate costs and benefits the effect of supply and demand on all products and companies became a textbook in England for nearly half a century one of the earliest neoclassical economists Economists during his time William Stanley Jevons theory of marginal utility Arthur Pigou, his pupil, followed his footsteps acknowledged by Nobel Prize winner Gary Becker father of microeconomics theories are still relevant today David Ricardo Thomas Robert Malthus Carl Menger Leon Walras Timeline 1842 1877 1865 1879 1890 1908 1919 1923 1924 July 26, 1842:
Born in Clapham, London 1865:
Graduated from St. John’s College, Cambridge in mathematics 1879:
Wrote "The Economics of Industry" with his wife 1890: Wrote his most notable work, "Principles of Economics" 1908:
Retired as a Cambridge professor on political economy 1919:
Wrote his 4th book, "Industry and Trade" 1892
Elements of Economics of Industry 1923:
He published his last book, "Money, Credit and Commerce" July 13, 1924:
Alfred Marshall passes away D S Supply & Demand Game 1842 - 1924 Economist: A cost incurred by a business when manufacturing a good or producing a service. agriculture manufacturing "Money, Credit and Commerce" (1923) Utility decreases,
so consumer surplus also decreases theory of general equilibrium "subjective theory of value" All three economists co-founded the theory of "marginal utility". Jules Dupuit:
calculating toll to charge for bridges supply is fixed Short Period Long Period - Alfred Marshall,
"Principle of Economics" alfred marshall contributed to the theory of marginal utility simultaneously, but never acknowledged the influence of these three men
He took Walras' theory of general equilibrium and developed theory of partial equilibrium to help analyze economic factors
Some think this method is flawed, but is still frequently used today Apple said demand for the iPhone 5 set a record and has already surpassed its initial supply, with some customers who pre-ordered the device now having to wait until October to get their hands on the slimmer, lighter new smartphone.
Apple is also continuing to sell the iPhone 4S, at a reduced $99, and the iPhone 4, which will be available for free, effectively positioning those designs “as the low-end model of the iPhone – a strategy which should help the company capture and defend market share from low-end Android phones,” Ben Reitzes, an analyst with Barclays Capital, said in a report today. 9/17/2012, 1:30PM Do you want a Ferrari? Of course you do. You've got the money? Great. But that doesn't mean you can actually buy one. A very limited supply and an almost unlimited demand immensely complicate the process of buying a new Ferrari. There are far too many buyers and not enough cars, it's that simple. From February, 2009 issue It's the same now as it was in 1776, when Adam Smith wrote "The Wealth of Nations": rich people love to have what others can't have. That is Ferrari. Was Marshall's theories ahead of his time? fastest and most efficient economy Marshall's concerns for urban sustainability were beyond people in his time urbanization and rapid population growth "The Economics of Industry " (1879) Land, Labour and Capital
Market Value "Principles of Economics" (1890) "Elements of Economics of Industry" (1892) "Industry of Trade" (1919) advancements in:
commercialization Theory of Demand: Theory of Supply: responding to current industrial change in Britain just applying theories in a neoclassical perspective
mainly popularized already existing theories ideas are very relevant to today's concerns about sustainability What significant ideas arose from Marshall's theories and how did you think it affected Britain at that time? In what situations would using partial/general equilibrium be more effective? How does a shift in demand affect consumer surplus? By: Eunice Chow, Alison Kwok, Victoria Ennis, and Ronnie Loo