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Week 2: Marginalist school (1871) (Characteristics marginalist schools…
Week 2: Marginalist school (1871)
Featuring
Forerunners
Antoine Augustine Cournot (1801-1877)
Jules Dupuit (1804-1866)
Johann Heinrich von Thünen (1783-1850)
Marginalists
Carl Menger (1840-1921)
Leon Walras (1834-1910)
William Stanley Jevons (1835-1882)
Characteristics marginalist schools
Increased focus on demand side Focus on marginal principle
More reliance on mathematics in economics
Stronger emphasis on behavior of individual agents Microeconomic focus
Rational behavior
5.Equilibrium approach
Limited role for government
Early bird:
Cournot (1801-1877)
Main contributions:
2.
Law of demand
: P (increase)--> D (decrease): No concept of marginal utility yet
3.
Theory of price formation in market with one or few suppliers
Theory of monopoly
Theory of duopoly
1.
Applied mathematics to economic analysis
“Recherches sure les principes mathematiques de la theorie des richesses” (1838)
--> all focus on margin
Early bird:
Jules Dupuit (1804-1866)
Main contributions
:
Marginal utility curve: utility attached to additional good
depends on how much one already has of the good
Johann von Thünen (1783-1850)
Main contributions:
1. Theory of location
Central optimality condition: use labor up till MP=MR
Transportation costs
Positive and diminishing marginal productivity of labor
--> all focus on margin
Marginalists:Jevons, Menger and Walras
JMW were not the first to introduce marginalist thinking in economics...
... but nevertheless the marginalist revolution is said to start in the 1870s with the publication of their books.
JMW incorporated new theories into a unified system of thought
Their ideas gained acceptance among other economists