ECS3705-Study-unit-5

Chapter 12, 15 & 18: The Marginalist/neoclassical school 1. Write an essay on the Marginalist/neoclassical institutional schools of economics, in which you pay attention to the following:  Its reaction against the classical school - The early marginalists reacted to the classical position which one-sidedly emphasised the suppliers’ valuation of the good (cost of production) as the main determinant of its price, by embracing the opposite one-sided position that regards demanders’ valuation (utility) as the main determinant of price. “Demand oriented price theory” and “emphasis on subjective utility” as main tenets of marginalism. However, the subsequent neoclassical theorists, Marshall in particular, combined cost and utility (suppliers’ and demanders’ valuations) in determining price. Be aware that marginalist/neoclassical theory is different from classical theory in that it wishes to determine the short-term market price rather than the long-term natural price