Question

1. Briefly identify and state the significance of each of the following to the history of economic thought: (i) Neoclassical thought, (ii) law of demand, and (iii) consumer surplus.

2. Which of the major tenets of the marginalist school apply to: (i) Jevons, and (ii) Menger? Explain.

Answer 1

1)Neo classical economists argue that supply and demand are major determinants of production ,pricing and consumption of goods and services.Utility plays an important role in determining value of product or a service
2.Law of demand: According to the law of the demand, When the price of a good increases the demand of that good decreases.When the price of a good decreases the demand for that good increases.
iii)Consumer surplus: consumer surplus takes place when the consumers are able to purchase the good at a price lesser than the price they are willing to pay.It is basically the difference between the maximum price the consumers are willing  to pay and the actual price the consumers pay.

B)

(I):Jevon introduced the concept of the law of indifference.He emphasisef that the exchanges must be mutually beneficial and higgledy-piggledy exchange process will pave it's way to equilibrium
II)Menger: Menger introduced the concept of the marginal utility.The concept of dimnishing marginal utility is as individuals consume more and more additional units of a commodity the satisfaction the individual derives will start to diminish.