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Principles of Economics, what role is played by population growth and diminishing returns according to Alfred Marshall and does he accept or reject the Ricardian view of rents?

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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Related questions

According to Principles of Economics, what does Marshall say determines rent. (what book and chapter does he explain this in)

PROBLEM 1 (This one is designed to give you lots of math practice!)

Consider the following individual utility functions:

Adam Smith: U(x,y) = xy

Jeremy Bentham: U(x,y) = xayb (Cobb-Douglas utility function)

Alfred Marshall: U(x,y) = ln x + ln y

John M. Keynes: U(x,y) = x + yb (Quasi-linear utility function)

Joan Robinson: U(x,y) = aX + bY (linear; perfect substitutes)

a. Solve for the MRS(XY) for each of the gentlemen (i.e., all but Joan Robinson). Show that Mr. Smith, Mr. Bentham, and Mr. Marshall all have diminishing MRS(XY), but that if a=b=2, their preferences exhibit constant, increasing, and decreasing marginal utility respectively. (Fortunately, diminishing MRS is the condition that guarantees convex indifference curves, so we can solve for their optimal consumption!)

Ā 

b. What is the general formula for Mrs. Robinsons (constant) MRS?

c. Find demand functions for x and y for Smith, Bentham, Marshall, and Keynes. Assume that each man has income I and that the prices of x and y are px and py respectively.

d. Now assume that a=1/2, b = 1/4, I = 600, px = 10 and py = 20. Use these values to find the utility-maximizing quantities of x and y consumed by each man.

e. Find an expression for the share of income Mr. Bentham and Mr. Marshall each devote to the consumption of good x, where this share, sx, is defined as

(px x)/I.

f. Find expressions for the income elasticity of demand for good x for Mr. Bentham and Mr. Marshall. Find expressions for the (own) price elasticity of demand for good y for these two men.

What do you think the role of fiscal (and/or monetary) policy should be in the future to stimulate long-term sustainable economic growth? Include key economic indicators such as unemployment, inflation, interest rates, GDP growth, etc. Integrate a discussion of some of the 10 Principles of Economics and Henry Hazlitt's "Economics in One Lesson".

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