17 terms

Neoclassical Economics

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When does neoclassical economics start?
1870
What is the theme of Neoclassical economics?
Marginalism
It is not all or nothing, its extra/additional thinking
Who founded Austrian Economics?
Carl Menger
How is homo Economicus relevent
Jeremy Bentham and the role of utils

Marginal thinking requires that one severely consider the beneits and the costs
What paradox does this resolve?
The diamond water paradox

The marginal utility of diamonds is very high--> diamonds have a greater value
Consumer _______________
Sovereignty, what they desire is what the market produces
One basic difference between classical economists and neoclassical ones?
Classical economists put more of an emphasis on the supply side
Neoclassicals put more of an emphasis on the demand side-> how do consumers get the greatest satisfaction at margin
How are consumers viewed in neoclassical economics?
As utility maximizers
Perfect competition ideally will lead to?
Allocative efficiency
Allocative efficiency occurs when?
Price=MC=MR
What book did John Bates Clark Write?
Distribution of wealth
What does bates write about concerning full employment?
That workers should only be hired if their real wage is equal to that which they contribute to the firm

The Marginal Revenue Product
What is MRP
W/P
Wages divided by the profit
Draw the graph of the labor market

consider W/P and MRP
.....
When will full employment occur?
When the MRP= the W/P
Describe the Marginal Productivity Theory of Income Distribution
The wage a worker receives should equal the value of their marginal product

This only occurs in a perfectly competitive market
What did Jevons contribute to?
Marginalism revolution
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