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Impact of Alfred Marshall on Economics

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Impact of Alfred Marshall on Economics
Robert L. Upshur
Grantham University

Steve Shaw
Microeconomics
August 21, 2012

Alfred Marshall (July 26, 1842 – July 13, 1924), was one of the most influential economists of his time. He led the British Neoclassical School of Economics, and was responsible for the emergence of Cambridge University as a center of economic research in the early twentieth century. Through his work, applying mathematical principles to economic issues, economics became established as a scientific discipline. Marshall attempted to bring together the classical approach, in which value was determined by cost of production, with the idea of marginal utility developed both by his British predecessor William Stanley Jevons and the Austrian School in continental Europe, downplaying the revolutionary nature of their insights. He argued that supply and demand factors (cost of production and utility respectively) both determine price, suggesting that their relative importance is mostly a factor of the time period (long run or short run) under consideration. Although Marshall's views were never completely accepted by all economists, his ideas were influential in advancing understanding of economic relationships, which are fundamental to the successful development and maintenance of a stable, prosperous society that benefits all its members. Modern economists owe the linkage between price shifts and curve shifts to Marshall. Marshall contributed to the "marginalist revolution" with the idea that consumers attempt to equate prices to their marginal utility. Marshall introduced the concept of time in the determination of price through his proposed different market "periods": 1. Market period—goods produced for sale on the market are in fixed supply, for example in a fish market. Prices quickly adjust to clear markets. 2. Short period—industrial capacity is taken as given. This is the time period in which the supply can be increased through additional labor and raw materials, but not capital improvements, in order to maximize profits. 3. Long period—the time when capital "appliances," such as factories and machines, may be increased. Profit-maximizing equilibrium determines both industrial capacity and the level at which it is operated. 4. Very long period—technology, population trends, habits, and customs may vary in very long period models.…...

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