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Neoclassical economics is grouping of a number of schools of thought in economics. There is not complete agreement on what is meant by neoclassical economics—in particular, vision, problem domains, and particular concerns vary among neoclassical economists.

Neoclassical theories often revolve around utility and profit maximization. Profit maximization lies behind the neoclassical theory of the firm , the derivation of supply curves for consumer good s, and the derivation of demand curves for factors of production. Utility maximization is the source for the neoclassical theory of consumption, the derivation of demand curves for consumer goods, and the derivation of factor supply curves and reservation demand .

Neoclassical economists define economics as the study of the allocation of scarce resources among alternative ends. Here's how William Stanley Jevons presented the economic problem :

Given, a certain population, with certain needs and powers of production, in possession of certain lands and other sources of material: required, the mode of employing their labour which will maximize the utility of their produce.

Neoclassical economics emphasizes equilibria, where equilibria are the solutions of individual maximization problems. Regularities in economies are explained by methodological individualism, the doctrine that all economic phenomena can be ultimately explained by aggregating over the behavior of individuals. The emphasis is on microeconomics. Institutions, which might be considered as prior to and conditioning individual behavior, are de-emphasized. Economic subjectivism accompanies these emphases. See also general equilibrium.

1 Origins of neoclassical economics

Neoclassical economics is conventionally dated from William Stanley Jevons' Theory of Political Economy ( 1871), Carl Menger's Principles of Economics (1871), and Leon Walras's Elements of Pure Economics ( 1874Events January 1 New York City annexes The Bronx January 23 Marriage of the Duke of Edinburgh, second son of Queen Victoria, to Grand Duchess Maria Alexandrovna of Russia, only daughter of Emperor Alexander III of Russia. January Signing of the Pangkor Tr – 1877Events January 1 Queen Victoria proclaimed Empress of India by the Royal Titles Act, introduced by United Kingdom Prime Minister Benjamin Disraeli. January 8 Crazy Horse and his warriors fight their last battle with the United States Cavalry ( Montana) Ja). These three economists have been said to have promulgated the marginal utility revolution, or Neoclassical RevolutionIn economics, the Neoclassical Revolution was the emergence of marginal theory of value as the central explanation for explaining the origin of value. The theory of marginal utility was about 1870 being independently developed on somewhat similar lines by. Historians of economics and economists have debated

Whether utilityThis article is about "utility" in economics and in game theory. For utility companies and similar concepts, see public utility. For utilities in computers, see computer software. In economics, utility is a measure of the happiness or satisfaction gained or marginalism was more essential to this revolution (whether the noun or the adjective in the phrase "marginal utility" is more important)

Whether there was a revolutionary change of thought or merely a gradual development and change of emphasis from their predecessors

Whether grouping these economists together disguises differences more important than their similarities.

In particular, Walras was more interested in the interaction of markets than in explaining the individual psyche through a hedonistic psychology. Jevons saw his economics as an application and development of Jeremy BenthamJeremy Bentham ( February 15, 1748 June 6, 1832) was an English gentleman, jurist, philosopher, eccentric, and legal and social reformer. He is best known as the founder of utilitarianism. The life of Jeremy Bentham Born in Spitalfields, London into a wea's utilitarianism and never had a fully developed general equilibrium theory. Menger emphasized disequilibrium and the discrete. Menger had a philosophical objection to the use of mathematics in economics, while the other two modeled their theories after 19th century mechanics.

Alfred MarshallAlfred Marshall ( July 26 1842 July 13 1924), born in Bermondsey, London, England, became one of the most influential economists of his time. His book, Principles of Political Economy ( 1890) brought together the theories of supply and demand, of marginal's textbook, Principles of Economics (1890), was the dominant textbook in England a generation later. Marshall's influence extended elsewhere; Italians would compliment Maffeo Pantaleoni by calling him the "Marshall of Italy". Marshall thought classical economicsClassical economics is a school of economic thought whose major developers include William Petty, Adam Smith, David Ricardo, and John Stuart Mill. It is seen by many as the first modern school of economic thought. Some authors, such as John Maynard Keynes attempted to explain prices by the cost of production. He asserted that the neoclassicals went too far in correcting this imbalance by overemphasizing utility and demand. Marshall thought the question of whether supply or demand was more important was analogous to the pointless question of which blade of a scissors did the cutting.

Marshall explained prices by the intersection of supply and demand curves. The introduction of different market "periods" was an important innovation in Marshall:

Market period. The goods produced for sale on the market are taken as given data, e.g. in a fish market. Prices quickly adjust to clear markets.
Short period. Industrial capacity is taken as given. The level of output, the level of employment, the inputs of raw materials, and prices fluctuate to equate marginal cost and marginal revenue , where profits are maximized. Economic rents exist in short period equilibrium for fixed factors, and the rate of profit is not equated across sectors.
Long period. The stock of capital goods, such as factories and machines, is not taken as given. Profit-maximizing equilibria determine both industrial capacity and the level at which it is operated.
Very long period. Technology, population trends, habits and customs are not taken as given, but allowed to vary in very long period models.

Marshall took supply and demand as stable functions and extended supply and demand explanations of prices to all runs. He argued supply was easier to vary in longer runs, and thus became a more important determinate of price in the very long run.

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