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Week Two Lesson - DemandandSupply AlfredMarshall'...

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Demand and Supply Alfred Marshall's best-known contribution to economics is the familiar model of  supply and demand, sometimes referred to as the "Marshallian Cross." The  demand and supply model represents a synthesis of the work that many earlier  economists had done. Classical economists, such as Adam Smith and David  Ricardo, articulated many of the concepts related to supply. A later group of  economists, the Marginalists, developed and articulated fundamental principles of  demand. Marshall was the first to combine them formally and truly unleash their  analytical power. Alfred Marshall (1824-1924) was born in Clapham, England, the son of a cashier  of the Bank of England. Despite his father's wishes that he study for the ministry  at Oxford, Marshall attended Cambridge University, where he studied  mathematics, physics and economics. In 1877 he married one of his students,  Mary Paley. They collaborated on his first book,  The Economics of Industry published in 1879. The leading economist of his time, Marshall belonged to what economists refer to  as the Neoclassical school of economic thought. Much of what appears in your  textbook comes from Neoclassical economics, and Marshall's contributions have  stood the test of time. Although Marshall used mathematics extensively in his  economic models, he emphasized that the math was merely a shorthand  language, and not the foundation for economic inquiry and analysis. Marshall  established his own set of rules for the use of mathematics in economic  theorizing: "(1) Use mathematics as a shorthand language, rather than as an engine of  inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then  illustrate by examples that are important in real life.(5) Burn the mathematics.(6)  If you can't succeed in (4), burn (3). This last I [Marshall] did often."(1) 1. Jeremy Bentham, An Introduction to the Principles of Morals and Legislation,  (New York: Hafner, 1948), p. 1. [Originally published in 1780].
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Photograph courtesy of: Used from the website of Thoemmes Press. Law of Demand Besides creating the now familiar diagram of supply and demand, Alfred Marshall  articulated the law of demand, and justified the law of demand with the concept of  diminishing marginal utility and development of the income and substitution  effects. As for the law of demand, Marshall stated: "There is then one general law  of demand: The greater the amount to be sold, the smaller must be the price at  which it is offered in order that it may find purchasers; or, in other words, the 
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