Question

Assumtion of marshall welfare definition. study point

Answer 1

The Marshallian theory of economic welfare is based on his tool of consumer s surplus. Marshall begins with the individual consumer’s surplus or welfare and then makes the transition to the aggregate consumer’s surplus. To explain the aggregate welfare of the community, he uses his tax-bounty analysis. First, we explain the individual consumer’s surplus or welfare and then the aggregate economic welfare.

Marshall’s Individual Consumer’s Welfare:

Marshall explains the individual consumer’s welfare with his tool of consumer’s surplus. Marshall defines consumer’s surplus as “the excess of the price which he would be willing to pay rather than go without the thing, over that which he actually does pay, is the economic measure of this surplus satisfaction.”

The price which a consumer pays for a commodity like salt, match box, postcard, etc. is always less than what he is willing to pay for it so that the satisfaction which he gets from its purchase is more than the price paid for it and thus he derives a surplus satisfaction which increases his welfare. He explains the consumer’s surplus from a given change in price as the area between the demand curve and the price axis within a range of the price variation