Most leading economists between the 1770s and 1870s misguidedly believed relative prices of goods reflected production costs and placed more weight on the amount of required labour.

The big challenge to this dogma was the theory of marginal utility. Carl Menger and W. Stanley Jevons independently argued that utility is subjective. A consumer’s demand is dependent on what deem valuable given their context. Therefore, the utility of a product varies, even for the same consumer. Menger and Jevons referred to this as an incremental utility - Alfred Marshall later called it the “marginal” utility of additional units consumed. Following the “Marginal Revolution”, in which these ideas replaced those of classical economists, Marshall’s “Principles of Economics” systematised many aspects of economics around these new terms and gave them the basic form they have today. Marshall contributed the idea that a combination of supply (dependant on the cost of production) and demand (dependant on marginal utility) determined prices.