What economic theories are Paul Samuelson and Wassily Leonti

What economic theories are Paul Samuelson and Wassily Leontief famous for?

Please answer clearly with 5~6 sentences each.

Solution

A. Paul Samuelson formulated five key economic theories which are listed below:

1. Theory of Revealed Preference:

According to revealed preference theory, a consumer expresses his preference of a set of consumable items over other combination of items. There are following basic assumptions of the theory:

1. The consumer\'s aim is to derive maximum satisfaction

2.The consumer always prefer a combination of two or more goods over other combinations

3. There is consistency in consumer\'s behavior while selection a particular combination of goods

However, the biggest demerit of the Revealed preference theory is that it is based on individual preference while market demand is not based on just individual customer\'s preference.

2. Social welfare function: This theory states that the social welfare depends on both economic and non-economiic factors. It is a set of indifference curves of several individuals in a society. The key assumptions of Sameulson social welfare function are:

1. Social welfare is dependant on both income and wealth of the individuals

2. Comparison of utlity preferences of people are possible

3. There are existence of both internal and external economies

B. Wassily Leontief was an eminent economist known for formulating economic theory such as input-output analysis and its broader impact on different sectors in an economy.

Input-Output analysis: The input-output model of Wassily Leontief depicts inter-relations among different sectors in an economy. The input-output analysis is useful in determining effect of trade imbalance or global recession on an economy. The Input-output theory assesses direct, induced and indirect impacts on an economy of an external shock. The direct impact is downfall in the expenditure or consumption pattern of customers. The indirect impacts are impacts like change in the wage rate and production due to fall in aggregate demand. The induced impact is fall in the supply price of raw materials due to decline in exports of textile items.