The Austrian School is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals and their self interest. Austrian school theorists hold that economic theory should be exclusively derived from basic principles of human action.
Carl Menger von Wolfensgrün was an Austrian economist and the founder of the Austrian School of economics. Menger contributed to the development of the theories of marginalism and marginal utility, which rejected cost-of-production theory of value, such as developed by the classical economists such as Adam Smith and David Ricardo. As a departure from such, he would go on to call his resultant perspective, the subjective theory of value.
Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as a whole, which is studied in macroeconomics.
Neoclassical economics is an approach to economics in which the production, consumption, and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good or service is determined through a hypothetical maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production. This approach has often been justified by appealing to rational choice theory.
In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In theoretical models where conditions of perfect competition hold, it has been demonstrated that a market will reach an equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price. This equilibrium would be a Pareto optimum.
In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded will equal the quantity supplied, resulting in an economic equilibrium for price and quantity transacted. The concept of supply and demand forms the theoretical basis of modern economics.
A price is the quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a physical good, the price for the service may be called something else such as "rent" or "tuition". Prices are influenced by production costs, supply of the desired product, and demand for the product. A price may be determined by a monopolist or may be imposed on the firm by market conditions.
Principles of Economics is a book by economist Carl Menger which is credited with the founding of the Austrian School of economics. It was one of the first modern treatises to advance the theory of marginal utility.
Friedrich Freiherr von Wieser was an early economist of the Austrian School of economics. Born in Vienna, the son of Privy Councillor Leopold von Wieser, a high official in the war ministry, he first trained in sociology and law. In 1872, the year he took his degree, he encountered Austrian-school founder Carl Menger's Grundsätze and switched his interest to economic theory. Wieser held posts at the universities of Vienna and Prague until succeeding Menger in Vienna in 1903, where along with his brother-in-law Eugen von Böhm-Bawerk he shaped the next generation of Austrian economists including Ludwig von Mises, Friedrich Hayek and Joseph Schumpeter in the late 1890s and early 20th century. He was the Austrian Minister of Commerce from August 30, 1917, to November 11, 1918.
The theory of imputation is based on the so-called theory of factors of production proposed by the French economist Jean-Baptiste Say and elaborated by the American economist John Bates Clark in his work The Distribution of Wealth. The proponents of the theory of imputation see its main task as elucidating which parts of wealth may be attributed (imputed) to labor and capital, respectively.
Marginalism is a theory of economics that attempts to explain the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility. It states that the reason why the price of diamonds is higher than that of water, for example, owes to the greater additional satisfaction of the diamonds over the water. Thus, while the water has greater total utility, the diamond has greater marginal utility.
Use value or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a commodity which can satisfy some human requirement, want or need, or which serves a useful purpose. In Karl Marx's critique of political economy, any product has a labor-value and a use-value, and if it is traded as a commodity in markets, it additionally has an exchange value, defined as the proportion by which a commodity can be exchanged for other entities, most often expressed as a money-price.
A theory of value is any economic theory that attempts to explain the exchange value or price of goods and services. Key questions in economic theory include why goods and services are priced as they are, how the value of goods and services comes about, and—for normative value theories—how to calculate the correct price of goods and services.
The paradox of value is the contradiction that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market. The philosopher Adam Smith is often considered to be the classic presenter of this paradox, although it had already appeared as early as Plato's Euthydemus. Nicolaus Copernicus, John Locke, John Law and others had previously tried to explain the disparity.
In economics, a market is a composition of systems, institutions, procedures, social relations or infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services to buyers in exchange for money. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate trade and enable the distribution and allocation of resources in a society. Markets allow any tradeable item to be evaluated and priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights of services and goods. Markets generally supplant gift economies and are often held in place through rules and customs, such as a booth fee, competitive pricing, and source of goods for sale.
In economics, economic value is a measure of the benefit provided by a good or service to an economic agent, and value for money represents an assessment of whether financial or other resources are being used effectively in order to secure such benefit. Economic value is generally measured through units of currency, and the interpretation is therefore "what is the maximum amount of money a person is willing and able to pay for a good or service?” Value for money is often expressed in comparative terms, such as "better", or "best value for money", but may also be expressed in absolute terms, such as where a deal does, or does not, offer value for money.
Within economics, margin is a concept used to describe the current level of consumption or production of a good or service. Margin also encompasses various concepts within economics, denoted as marginal concepts, which are used to explain the specific change in the quantity of goods and services produced and consumed. These concepts are central to the economic theory of marginalism. This is a theory that states that economic decisions are made in reference to incremental units at the margin, and it further suggests that the decision on whether an individual or entity will obtain additional units of a good or service depending on the marginal utility of the product.
In economics, marginal utility describes the change in utility of one unit of a good or service. Marginal utility can be positive, negative, or zero.
Microeconomics is the study of the behaviour of individuals and small impacting organisations in making decisions on the allocation of limited resources. The modern field of microeconomics arose as an effort of neoclassical economics school of thought to put economic ideas into mathematical mode.
This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.
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