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This is a social science that studies the problem of choosing in conditions of limited resources to maximize the satisfaction of people's needs.

The main task of economic theory is to give an explanation of the events taking place in economic life with the help of models of reality. Therefore, it is customary to distinguish between positive economic theory, the purpose of which is to study the behavior of economic agents, and normative theory, the purpose of which is the development of economic policy.

The subject of study of economic theory is the behavior of an economic agent in a certain economic system. By "Economic agent" is meant not a real person or group of people, but a simplified (idealized) model that is convenient for analysis. To study behavior, economics models the process of individual choice from a set of options under the condition of limited resources. All economic processes at the group level and at the macro level are interpreted as the result of many individual decisions. Correct aggregation of individual solutions is a problem in itself.

Economic theory consists of three main sections: microeconomics, macroeconomics and econometrics. Basic models and concepts are used in narrower areas of science: the theory of economic growth, development economics, international economics (the theory of international trade and the theory of international finance), economics of the public sector, the theory of industrial markets, the theory of auctions, various sections of finance and other areas.

The methodology of economic science and the history of economic doctrines are directly adjacent to economic theory. In addition, a large amount of research is carried out at the interface with other social sciences: history, law, criminology, sociology, political science, as well as neurobiology and psychology (neuroeconomics).

Functions of economic theory:
  1. Theoretical - studies and explains the processes and phenomena of the economic life of society.
  2. Worldview - the formation of a systematic, scientific worldview.
  3. Critical - on the basis of knowledge of the patterns of management of economic processes and phenomena, a management mechanism is developed, its structure and elements that actively influence the subjects of a market economy and determine their expedient behavior.
  4. Methodological - acts as a theoretical basis for branch sciences, functional sciences and a number of economic sciences, located at the junction of various branches of knowledge.
  5. Prognostic - scientific. forecasts of economic development, determination of prospects for social development.


Further Resources



Li Jin
September 24, 2021
Harvard Business Review
Platforms have rewritten the contract between workers and companies. Here's how gig workers and creators are starting to push back.
Grace Lordan
August 17, 2021
Harvard Business Review
Design your policies to maximize fairness, performance, and cultural cohesion.
Science X staff
August 16, 2021
Exceeding tipping points in the climate system could lead to a measurable increase in the economic impacts of climate change, according to a new paper published in the journal Proceedings of the National Academy of Sciences.
Arjun Narayan
August 12, 2021
Harvard Business Review
What happens when people are working a lot, but not always at the same time?
July 30, 2021
Outlook's annual ranking of India's best Commerce colleges (in partnership with ICARE) can help students make an informed choice


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