1.BIOGRAPHY PERSONAL LIFE EDUCATION AND EARLY CAREER 2.CONTRIBUTION TO THE FIELD OF ECONOMICS PRINCIPLES OF ECONOMICS THEORY OF DEMAND THEORY OF PRODUCTION THEORY ON SUPPLY 3.METHODOLOGY 4.CRITICAL REMARKS

2. Biography
Personal life:
Alfred Marshallwas born in London on July 26, 1842. He was
the second son of William Marshall,a clerk at the Bank of
England,and Rebecca Marshall. He was a very bright student
and had his interest in mathematics and chess but his father
prohibitedhim. He was married to Mary Paley
Education & Early Career:
He did hisschooling in London itself and for his higher studies
he had got a scholarshipfrom Oxford but he refused that to
pursue his dream by choosing Cambridge so as to study
mathematics. He felt that the faculty was much better than
that of Oxford. He had to leave Cambridge in between because
of his marriage.
After his marriage to Mary Paley, who was very supportive of
his work and they together publishedhis first book called
“Economics of Industry” which became very famous and was
used as the textbook for the subject PoliticalEconomics, known
today as Economics. He later in 1884 returned to Cambridge.

3. Contributions to field of economics
Principles of Economics:
In defining Economics, Marshall stated:
“Politicaleconomy or economics is the study of mankind in
the ordinary business of life; it examines that part of
individual and social action which is most closely connected
with the attainmentand use of the material requisites of well-
being.”
Compared to classical school Marshall felt that economics was
a science of human behaviorand not just all about the material
goods that help in economy.
The aim of the Principles is to study the economic aspects of
human behaviorin order to derive the laws governing the
functioningof the economic system.
Theory of Demand:

4. There was a controversy over whether cost of production or
Utility determines price. The classical school thinkersbelieved
that cost of productiondetermined price. Alfred Marshall and
his colleagues from the Neo-classicalschool believedthat utility
determines price.
Marshallbelieved that influence of time and awareness of the
independenceof economic variables would resolve the
question. The shorter the period, the more important the role
of demand in determining price and the longer the period, the
more important the role of supply.
Alfred Marshall’smost important contributionto demand
theory was his clear formulation of the concept of price
elasticity of demand. Price and quantity demandedare
inversely related to each other; demand curves slope down and
to the right. Degree of relationshipis shown by the coefficient
of price elasticity.
Price elasticity of demand:

5. Elasticity of Demand:-
ED= percent change in quantity demanded/
percent change in price
• Coefficient is negative b/c of inverse relationship; by convention the
coefficient is shown as positive by adding the negative sign to the right
side of the equation.
• If price decreases by 1 percent and quantity demanded increases by 1
percent, total revenue is unchanged, and the coefficient value is 1. The
commodity is said to be price elastic.
• If price decreases by a given percentage and the quantity demanded
increases by a smaller percentage, total revenue decreases and the
coefficient < 1. The commodity is price inelastic.
• Marshall also applied the elasticity concept to the supply side
• Marshall was 1st to express the concept of elasticity with
mathematical precision and is considered its discoverer.
Theory of Production:
Marshall conceived four different periodsof production:

6.  Market period - Very short period is a period in which
supply is fixed (perfectly inelastic). There is no reflex
action of price on quantity supplied.
 Short run - A period in which the firm can change
production and supply but cannot change plant size.
Higher prices because larger quantities to be
supplied(upward sloping supply curve).
 Long run - In this period plant size can vary and all
costs become variable.
 Secular period (Very long run) - In this period it
permits technology and population to vary.
In Alfred Marshall theory on costs of production,he said that
there were two componentsof total costs in the firm.
 Prime costs - Costs that vary with output (also called
special or direct costs).
 Supplementary costs - Costs that do not vary with
output (fixed costs).
Marshall on Supply:
Consumers’ Surplus:

7. The difference between the total expenditures consumers
would be willing to pay and what they actuallypay.
His most important contributionto theory of supply was his
concept of the time period, particularlythe short run and the
long run. Supplycurve dependson the time period under
analysis.
His important theory on supply was:
Spoilingthe market - selling at low prices today and
preventing the rise of market prices tomorrow, or selling at
prices that incur resentment of other firms in the industry
Methodology

8. His methodology was
(1) Use mathematicsas a shorthandlanguage, rather than
an engine of inquiry
(2) Keep to them until you are done
(3) Translate it to 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).
Of course, trying to merge three methodologieshad the result
of being dislikedby all.
Critical remarks
Due to his methodologywhich combined 3 methodologies it
attracted many German & English historicallyoriented

9. economists found his economics too abstract and rigid. This
was a major setback because of his excessive usage of
mathematics.
Veblen and other prominent institutionalistsattacked his
method. And this made other economist make changes to his
definitionof economics.
Advocatesof abstract mathematicalmethodology criticized his
historical method and resented his remarks about the
limitationsof theory and mathematics. Even hisusage of
mathematicswas very much criticized by the abstract
mathematicians.
Conclusion
He was calledthe father of modern orthodoxmicroeconomic
theory (neoclassicism) along with Walras. He had lots of

10. concern for the poor and his desire to improve the well-being
of society through economics.
He not only initiatedmodern economicsbut also the
profession. He produced many great scholars like J.M. Keynes
and Joan Robinson. His first book also was the textbook for
many years and he started the textbook legacy.
He started the branchingof economics and he dealt mainly
with Microeconomicsand at the end of his life he began to deal
in what today we call Macroeconomics.
His dabblinginto Macroeconomics which included:
• Economic Fluctuations,Money and Prices
• Marshallstudied influenceof monetary forces on general
level of prices.
•A book on macroeconomics called Money, Credit and
Commerce (1923)