Important Economists

Known as the 'Father of Economics'. Defined the subject in his seminal work.

Defined Business Economics as a component of Applied Economics, bridging the gap between theory and practice.

Equated Business Economics with Managerial Economics. Focuses on applying economic principles to managerial decision-making.

Laid the foundation for Socialism and a command economy structure along with class struggle concepts.

Developed the Law of Diminishing Marginal Utility (DMU) and derived the Law of Demand from it.

Pioneered the Indifference Curve Analysis (Ordinal Approach). Explained demand via 'Price Effect' (Substitution + Income Effect).

Identified the 'Veblen Effect' or Conspicuous Consumption. Prestigious goods violate the Law of Demand as they are bought for status.

Identified 'Giffen Goods' (special inferior goods). Observed British workers buying more bread even when prices rose, violating demand laws.

Proposed the 'Demonstration Effect', stating that consumer choices are influenced by observing the consumption habits of others.

Defined production as the organized transformation of resources into finished goods to satisfy demand.

Stated that Land possesses 'original and indestructible' powers that cannot be replicated or destroyed.

Defined Profit as the reward for bearing uncertainty. Risk-bearing is the entrepreneur's non-delegable function.

The true function of an entrepreneur is Innovation—introducing new products, methods, or markets.

Growth Maximization Model. Managers aim to maximize the firm's balanced growth rate, reconciling owner and manager conflicting goals.

Sales Revenue Maximization Model. Firms prioritize maximizing sales revenue (once a profit constraint is met) rather than pure profit.

Defined the Production Function as the max output possible with given inputs and technology.

Famous Production Function (Q = K L^a C^b). Concluded that long-run manufacturing exhibits Constant Returns to Scale.

Kinked Demand Curve Hypothesis. Explains price rigidity in Oligopoly markets due to asymmetric reaction to price changes.

Classified Price Discrimination into 3 degrees based on how much consumer surplus the monopolist captures.

Attributed business cycles to fluctuations in Aggregate Effective Demand.

Trade Cycle is purely a monetary phenomenon. Caused by unplanned changes in money supply.

Psychological Theory. Optimism and Pessimism in the business community drive economic waves.

Innovation Theory. Trade cycles are the result of waves of innovation hitting the economy.

Cobweb Theorem logic: Current prices essentially determine future production, leading to cyclical fluctuations.

Nobel Laureates credited with developing the modern system of National Income Accounting.

Revolutionized Macroeconomics with 'The General Theory' (1936), shifting focus to employment and interest.

Advocated for minimal government with only 3 roles: Defence, Justice, and Public Works.

Three-Branch Taxonomy of Government: Resource Allocation, Income Redistribution, and Stabilization.

Introduced Pigouvian Taxes and Subsidies to correct market failures caused by Externalities.

Defined Public Goods (Collective Consumption Goods) which are non-rival and non-excludable.

Quantity Theory of Money (MV = PT). Emphasized the Transaction Motive for holding money.

Cambridge Approach (Cash Balance Application). Demand for money (Md = kPY) includes Precautionary motive.

Liquidity Preference Theory. 3 Motives: Transaction, Precautionary, and Speculative.

Inventory Theoretic Approach. Money is inventory; holding it minimizes transaction and carrying costs.

Restatement of QTM. Demand for money depends on Permanent Income, treating money as a capital asset.

Risk Aversion Theory. Liquidity preference is essentially behavior towards risk management.

Money Multiplier Approach. Money supply depends on High Powered Money, Reserve Ratio, and Currency Ratio.

Theory of Absolute Advantage. Proved International Trade is a positive-sum game, not zero-sum.

Theory of Comparative Advantage. Nations should specialize where they have lower opportunity costs.

Modern view: Comparative advantage allows developing nations to trade profitably even without absolute advantage.

Factor Endowment Theory. Trade patterns are determined by relative abundance of Labor and Capital.

New Trade Theory (NTT). Trade is driven by Economies of Scale and Network Effects, not just endowments.