economics, concept of marginal utlity

Economics by Marshall & Robbins, Concept of Marginal Utility

What is Economics?

Economics is a subject associated which is an amalgam of social science and science.

According to Alfred Marshall, a great propounder of Modern Economics defined economics as “the study of mankind in the ordinary business of life”.

Book by Adam SmithAn inquiry into the nature & cause of the wealth.

Alfred Marshall’s theory of economics comes in the era of industrialization therefore it is criticized by many people.

Charles Dickens simply rejected the theory of economics.

Some other said “Economics is a study of pigs”.

Economics  can be categorized into two parts

  1. Macroeconomics –  Macro means large which marshall has stated as Economics is a subject of a wealth of a nation.
  2. Microeconomics – Micro means small which according to Marshall means that it is a household concept or Economics is a subject that has the basics of welfare.

Alfred Marshal has given Welfare concept that’s why his economics is known as Welferian Economics.

Alfred Marshall Thought Process

  1. Positive Science – Straight Forward (what is it) (क्या है)
  2. Nominative Science – What ought to be (क्या होना चाहिए)

Then Robbins came into the picture and asked a question to Marshall – Is every activity, that contributes to social welfare is economics?

Marshall said “yes”

Robbins then gave the example of Drugs

This could not be explained by Marshall, for which he is criticized and his theory of economics is getting faded.

Robbins gave a definition of Economics as – If there is no scarcity, there is no economic problem, and there is no economics if there is no problem. Thus, Robbins defines economics as “ a science that studies human behavior as a relationship between ends and scarce means which have alternative uses”.

Robbins was more focused on Scarcity concept which he believe is a positive science.

He mainly used 3 terms to define his way of economics: Wealth, Welfare, Scarcity

Difference between Need, Want and Demand?

Need – Need is a state of self deprivation. Needs may be basic or higher.

Wants – Fulfillment of your need is want

Demand – Any wants that come under my purchasing power.

Concept of Marginal Utility

In economics, utility is the satisfaction or benefit derived by consuming a product; thus the marginal utility of a good or service is the change in the utility from an increase in the consumption of that good or service.

The term marginal refers to the amount of benefit that can be derived by consuming one extra unit.

1. Cardinal Measurement – Cardinal measurement of utility refers to the measurement (or expression) of utility in terms of units like 2, 4, 6, and 8. Cardinality means that utility can be measured in numbers.

*Ordinal Measurement – Value has no absolute meaning i.e Ranking Method  (1st in class, 2nd in class)

2. Independent Utilities – Every commodity has a different level of satisfaction and is independent of one another. Utilities of each component are independent.

3. Marginal Money in utility is constant- Yard Stick (in Yard Stick money comes which is used to check the others worth)

Key point – in Hobbys and collecting items utility concept can not be applied

Marginal utility will keep on decreasing as we consume one extra unit.

Total Satisfaction = Sum of marginal units

Ex- 4 chapatis+ 3 chapatis+ 2 chapatis + 1 chapati = 10

Average = Total Consumption/no of units = 10/4

Marginal = Total utility of n units – total utility of (n-1) units

4. Introception – In this Marshall said that the thought process of the researcher is the same as the other people.






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