Abstract
Alfred Marshall identified the area to the left of a demand curve as consumer surplus, but he added that his discussion was valid only under the assumption of ‘constant marginal utility of money’. For much of the 20th century economists debated the meaning of that phrase and its relevance to consumer surplus. The analysis became clear only after the development of duality theory, particularly the properties of the expenditure function. Marshall’s caution becomes unnecessary with a proper definition of consumer surplus.
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Marshall, A. 1920. Principles of economics. 8th ed. London: Macmillan.
Samuelson, P.A. 1942. Constancy of the marginal utility of money. In Studies in mathematical economics and econometrics: In memory of Henry Schultz, ed. O. Lange, F. McIntyre, and T.O. Yntema. Chicago: University of Chicago Press.
Silberberg, E., and W. Suen. 2000. The structure of economics. 3rd ed. New York: McGraw-Hill.
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Silberberg, E. (2018). Marginal Utility of Money. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_954
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DOI: https://doi.org/10.1057/978-1-349-95189-5_954
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Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95188-8
Online ISBN: 978-1-349-95189-5
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