2. THE CLASSICAL AND
MARSHALLIAN WELFARE
ECONOMICS

3. THE CLASSICAL WELFARE ECONOMICS

4. Classical theory do not develop an
specific theory of economic
welfare . The classical economics
relates to the idea of
. Smith
. Ricardo
. J. S .Mill

5. Smith explain real national income of a
nation in terms of its physical volume of output
whichis an index of its economic welfare . The
real value of a commodity is its labour price
being risk some and disagreeable it is the
division of labour which motivates labour to
produce more smith associates increase in
welfare with a reduction in the sacrifices
required to produce more commodity

6. According to Ricardo…..
A reduction in human effort per unitof output
constitutesan improvementin welfare. Man – hours
per unit ofoutputare regarded as the measure of the net
national income. His idea aboutriches , more the real
income onthe other hand valuesvaries inversely with
the labourtime required per unit of output. It is there
fore an inverse index of the average productivityof
labourand economic welfare .Thus , for Ricardo,
welfareis a matter of minimisinghuman effort per unit
of output.

7. According to J . S . Mill…..
Do not specify about economic welfare .
A reduction in working hours , keeping
wages constant , would inevitable reduce
output per man and lead to
unemployment .

8. MARSHALLIAN WELFARE ECONOMICS

9. Alfred Marshall (1842-1924)
British economist

10. According to Alfred marshall Economics is the
study of man in the ordinary business of his
life”;It examines that part of individual and social
action which is most closely connected with the
attainment of and with the use of the material
which will beuseful for the wellbeing

12. CHARACTRSTICS
1. A study of material
requirements of well being.
2. It concentrated on the
ordinary business life.
3. it stress the importance of
man.

13. MARSHALLIAN WELFARE ECONOMICS
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 .

14. MARSHALL’s INDIVIDUAL CONSUMER’S
WELFARE
Marshall explains the individual
consumer’s welfare with his tool of
consumer’s surplus .
Marshall defines : consumer
surplus as “The excess of the price which
he wouldbe willingto pay rather than gowithout
the thing, over that which actually does pay ,is the
economicmeasure of this surplus satisfaction”.

15. The price whicha consumerpays for a commodity
like salt , match box , postcard etc..Is always less
thanwhat he is willing to pay for it so that the
satisfaction which he getsfrom its purchase is more
thanthe price paidfor it and thus he derives a
surplus satisfaction whichincreases his welfare . He
explains the consumer’s surplus from a given
change in the price as the area betweenthe demand
curve and the price axis within a range of the price
variation .

17. Prof . hicks

20. consumer surplus which is the sum
total of the surplus from a number
of commodities he buys , with a
given money income . By adding up
consumer’s surplus for that
commodity can be known . The
demand schedule so formed will be
the market demand curve . But it
presupposes the non existence of
interpersonal difference in customs
,habits, and income of the

21. Thank you