Alfred Marshall - History of Economic Thought - Lecture Slides, Slides of Economics

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Alfred Marshall (1842-1924)

Alfred Marshall (1842-1924)

• Principles of Economics , 1890

Reciprocal Demand

• Graphical analysis of two-country trade

Offer Curve: Country A

Quantity Imported of Good Y

Quantity Exported of Good Y

Quantity Exported of Good X

Quantity Imported

of Good X

No trade

No-trade terms of trade

Offer Curve: Country B

Quantity Imported of Good Y

Quantity Exported of Good Y

Quantity Imported of Good X

Quantity Exported

of Good X

Offer Curve: Country B

Quantity Exported of Good Y

Quantity Imported of Good Y

Quantity Imported of Good X

Quantity Exported

of Good X

Elasticity of Demand

• Elasticity of Demand formula, 1882

Elasticity of Supply

• Supply elasticity depends on time available to

producers to respond to a price change

– Market period: perfectly inelastic supply, price is

determined entirely by demand in the case of

perishable goods and by expected future prices in the

case of durable goods.

– Short run: rising supply curve, price is determined by

both supply and demand, usage levels of some

resources are fixed

– Long run: usage levels of all resources are variable,

supply could be a falling curve

– Very long period: changes in knowledge, population

and capital cause long run prices to change gradually

Assessment

• Neo-classical synthesis.

• The Adam Smith of his age.