Sample Comparison of W.S Jevons’ and A. Marshal’s Thoughts Essay

Comparison of W.S Jevons’ and A. Marshal’s Thoughts

The economic market is characterized with different economic agents whose objective is to obtain high satisfaction levels from market activities. As it is the case, main economic markets talked about include labor market, commodity market and foreign exchange market (Chin & Hock 212).

8Every market has its economic actors who aim at deriving maximum satisfaction from market operations. Therefore, optimization has become relevant in every segment. This is to say that many companies aim at cutting down on production costs and maximizing on revenues as well as output obtained from different production processes.

Consumers also aim at getting high utility levels from their consumption bundles and minimizing their expenditures. From the two cases, economic actors are known to be rational in their decisions to purchase and sell products and services in different markets. Under given circumstances, the economy can operate efficiently in a monopolistic market structure where suppliers and or firms are the only determinants of market prices.

Similarly, consumers can consider different modes of operation especially those that prevent sellers from exercising their market rights. In the event of such occurrences, the market is considered monopolistic and it is very common in labor markets. This paper therefore analyzes situations are offered by Alfred Marshall and William Stanley Jevons.

It happens that Jevons and Marshall are neoclassical economists. The two economists employ approaches that provide economic analysis based on determination of market prices, income distributions and outputs in different markets as per demand and supply. The two economists according to their views strongly believe that economic players pursue the urge to maximize their utility area to certain constrains including the cost of production, competition from other actors and individual income.

Jevon’s thoughts in a close examination reveal that an economic actor has the right to decide the market to operate in, choose from an existing market and settle for the best choice from various commodity products as they emerge from the market. According to Jevon, economic good should at all times have a characteristic of recognition by economic actors who are in a position of satisfying their needs (Chin & Hock 217).

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According to economic actors, an economic good should bring pleasure to its producers other that causing just pain. This is the concept by which, different scholars derive the meaning of consumer and producer production. Economic actors according to Jevons, in specific consumers make valuable judgment on level of utility they derive from consuming a service or product (Chin & Hock 219). Jevons offers his assumptions that individuals may be willing to spend more money on additional commodities consumed to the point where marginal utility begins to diminish.

With the consideration, one can easily assume that utility is highly measurable in terms of units of products consumed. Economic actors according to Jevons also maximize on level of utility derived from a product through prioritization because their actions are fully constrained by the ability to purchase.

Jevons in his prediction also argues that the urge of an economic actor is to optimize even in little market operations to the extent of making choices similar to those they make when purchasing (Bazen & Stephen 215). Jevon to this extent offers a utilization method that provides a shift from common optimization models. His introduction of a model that depicts operations of an economic market places his work in critical point for criticism.

The model of operation for Jevon is based on the concept that market actors operate based on their interests. This is to say that any additional value consumed or produced should provide the highest levels of satisfaction to an economic actor. If a market is characterized with production of goods in bundles for consumption, the bundles namely X and Y, a utility that maximizes the actor will offer the same quantities of goods X and Y, to ensure equal Marginal Utilities (Bazen & Stephen 125).

That is to also say, Mux=MUy and this is contrary to Marshall’s view in regards to additional utility generated from consumption of an extra commodity unit. Marshall’s view also revolves around prices of different commodities as the only determinants of the level of satisfaction of an economic actor.

Marshall intends that any actor in the market would be more than willing to pay an extra amount for any additional utility derived from consumption of a specific product or service. He also intensifies his rationale by making a market proposal that it has ability of supplying different bundles including bundles X and bundles Y, where the ratio of the two Marginal Utilities of two goods should be equal to their prices (Bazen & Stephen 126). To be exact, Mux/MUy=Py/Px so that Mux.Px=MUy.Py.

The equation representing utilization of good X according to Jevons, is such that U=f(X) and the marginal utility of goods (MUx) would be a derivative of the function U=f(X), and to be precise du/dx=f’(x) =MUX (Cropp &Truman 278). In this relevance, Jevons employs differential calculus to provide a model that can be efficiently used to determine total marginal utility of a product.

Total utility for an economic actor according to Marshall on the other hand is given as U=f(x, y), so that by employing cross partial derivatives, the total utility of the actor is generated. To be exact, du=f’(x) dx + f’(y) dy (Cropp & Truman) 278. However, Marshall and Jevons accept that the willingness of an actor to pay for a specific service or good largely depends on marginal utility of the product.

Marshall proposes that marginal utility would be very important in analyzing market trends but there is not in determining its demands as argued by Jevons. Marshall’s point of view indicates that the sole factor that affects demand and supply of goods and services is market price. His view offers support to theories presented by David Ricardo and Adam Smith in their classical thinking (Messina, Michelacci, Turunen & Zoega 143).

Jevons intentions still under different market operations shift to operations in a labor market. His analysis focuses on demand and supply of labor under the right market competition (Vettori 334). The supplier of labor services in labor market is the employee or the worker while the demander of the services is the firm or the employer. The interaction between an employer and employer in regards to exchange labor services for wages results into creation of a labor market.

The market operates under set conditions and each actor has a unique motive from the others. Generally, the aim of an employee is to maximize his or her wage and work within the shortest time possible. An employer on the other hand expects the employee to dedicate his or her time for the work under the lowest pay. There seems to be a conflict of interest between the two and each participant tends to optimize the benefits that would arise from his or her role in the market, based on market labor analysis.

It also seems that there is an initial disutility amongst workers as per Jevon’s theory of labor amongst the workers in production of different products and services (Vettori & Stella 110). He presupposes that a reduction in output level in initial operation stages can be efficiently explained by lack of motivation amongst the workers and the drive to produce.

To be precise, workers utility happens to diminish as they produce more output at the initial production stages. Jevon bases his theory on the concept that with waning marginal product of labor, any employee can provide his or her services to the point where the last unit of marginal utility produced is equal to marginal disutility of the unit of labor used to produce it.

As a result, labor could be optimal (Cropp & Truman 301). Even so, Jevons tends to fail to take into consideration interests of the firm when presenting his arguments. His theory does not explain how the company would optimize in the event where an employee refuses to provide his or her labor services to the company.

According to Marshall, the operation of a firm and workers is mainly based on employment terms and objectives of the firm (Bazen & Stephen 127). The main objective of a firm is to make the most of its output and at the lowest price possible. This could mean that the cost of employment has to go down in the event where a company wishes to cut down on its operation costs, or other ways would be used to recover costs of employment (Messina, Michelacci, Turunen, & Zoega 144).

A firm, in an effort to maximize on its profits would want to hire more employees to the point where marginal productivity of each employee is equal to the salary paid by the firm. According to Marshall, MUL=w/p under employment terms, where MUL refers to marginal product of each employee and w is nominal wage while p is output price (Bazen & Stephen 201).

Additionally, Marshall proposes that market prices (P) of most goods would equal their production costs, calculated after considering production costs. More firms would gain market entry is they were to charge high prices thus creating high competition thus, the prices of different goods would drop (Messina, Michelacci, Turunen & Zoega 156). Consequently, with reduced prices of goods, wages of workers would also rise alongside the productivity.

To this end, Marshall proposes that firms and workers under a healthy competition gain equally. This is quite different from what Jevons proposes.

In conclusion, the two theories analyze various economic situations and the role played by economic actors in a given market segment (Bazen & Stephen 131). The entire role of economic actors is illustrated in the two models and it helps in explaining explicit actions taken by different product suppliers in creating prices that match their production processes.

Whereas market forces works towards creating steady conditions in market prices and goods supplied, it would also be very important if a person analyzes critically the actions of economic actors towards price change as proposed by different economic theories and policy makers. The market would in general be even when the interests of producers match the interests of the consumer, in which case, the market is considered to have cleared.

 

Works Cited

Bazen, Stephen. Econometric Methods for Labour Economics, 2011. Print.

Chin, Anthony, and Hock G. Ng. Economic Management and Transition Towards a Market Economy: An Asian Perspective. Singapore: World Scientific, 1996. Print.

Cropp, Robert A, and Truman F. Graf. Market Adjustments Confronting Wisconsin Fluid Milk Processors. Madison: Research Division, College of Agricultural and Life Sciences, University of Wisconsin, 1972. Print.

Messina, J, C Michelacci, J Turunen, and G Zoega. Labour Market Adjustments in Europe. Cheltenham: Edward Elgar Pub, 2006. Internet resource.

Vettori, Stella. Changing commodity and Labour Markets: Social and Economic Impacts of the Demographic Time Bomb. Farnham: Ashgate, 2010. Print.