economic theory


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Economics

The study of how people produce, trade, and use goods and services. Economists look at how different actors, such as individuals, companies, and governments, interact with one another to maximize the fulfillment of their needs through the use of scarce resources. Economics also includes the study of supply, demand, and the relationship between the two. There are a number of schools of thought within economics. Some major schools are classical economics, which considers the sources of production as well as the role of the Invisible Hand of the market, and Marxism, which considers the exploitation of labor by holders of capital. Other, modern schools of thought include Keynesianism, which emphasizes the role of demand as opposed to supply, and monetarism, which promotes the use of the free market and the considers the role of money supply in economic growth. See also: Macroeconomics, Microeconomics.

economic theory

the formulation of ECONOMIC MODELS about the relationships between economic variables in order to generate testable hypotheses from these models. Where a HYPOTHESIS conflicts with real world data, then the hypothesis will be amended or abandoned in favour of a better one; where the hypothesis is confirmed by the data, then it can form a valuable guide in the specification of ECONOMIC POLICY. Economic theory aims to produce simplified economic models of real-world economic phenomena by employing a process of logical deduction from sets of initial assumptions about the behaviour of consumers, producers, etc. (often using mathematical analysis). Having specified a hypothesis based upon the economic model, it is then possible to test the hypothesis against empirical data. See HYPOTHESIS TESTING.
References in periodicals archive ?
Blaug used the method of economic theory to elucidate the formal structure of the implicit analytical models employed by his cast of great predecessors.
It should come as no surprise, then, that economic theory was totally inadequate in helping them to understand the nature of the looming problem and that the policymakers who relied on this theory couldn't see the crisis coming and were therefore unable to prevent it or even mitigate its effects.
Together, they provide the novice with a remarkable introduction to economic theory in general.
ISLAMABAD, July 16, 2011 (Balochistan Times): Sustainable Development Policy Institute (SDPI) would organized a lecture on corruption and development: perspectives from economic theory here on Monday.
This essay presents a critical analysis of the economic theory of corporations and its idioms, such as "nexus of contracts", "agency costs", and "shareholder value".
Professor Wilkie is on the editorial board of the Journal of Public Economic Theory and the International Journal of Communication.
While touching on aspects of his economic theory, it is primarily focused on events in his life, uncovered with substantial research.
Economic theory holds that higher wages can be used to attract and retain more productive workers.
THIS week's economic theory is the concept of counterfactual circumstances.
Also, introducing Islam's economic theory, using OIC national currencies in trading and commercial cooperation, establishment of a joint market and annihilation of poverty were among his suggestions discussed at the OIC summit.
IN THIS TEXTBOOK, aimed at advanced undergraduates, Tito Boeri and Jan van Ours provide an overview of the economic theory of and the empirical findings on the workings of a variety of labour market institutions.