Tricia Janine R.

Lavarez ENTRE3 – MICROECONOMICS

BSE – 1C

ECONOMIC THEORIES relies upon principles to analyze behavior of economic agents.

Economic theories help us make sense of complex economic systems and guide decision-
making in areas like government policy, business strategy, and financial markets.

1. Classical Economics: This theory, which is linked to economists like Adam Smith and David
Ricardo, places an emphasis on the function of free markets and little government interference.
Markets have an urge to self-regulate and stabilize, according to this theory.
2. Keynesian Economics: This John Maynard Keynes-developed theory calls for government
intervention in the economy to boost demand and lower unemployment during periods of
recession or depression.
3. Monetarism: Championed by Milton Friedman, this theory suggests that changes in the
money supply are the primary drivers of changes in economic activity. It advocates for stable,
predictable increases in the money supply.
4. Austrian Economics: This school of thought, with figures like Ludwig von Mises and
Friedrich Hayek, emphasizes the importance of individual choices, free markets, and the
limitations of central planning. It opposes most forms of government intervention.
5. Neoclassical Economics: This modern theory builds upon classical economics and
incorporates mathematical models to analyze how individuals and firms make decisions in
markets.
6. Behavioral Economics: This relatively young discipline combines insights from psychology
and economics to comprehend how people frequently depart from strictly rational decision-
making. It is headed by academics like Daniel Kahneman and Richard Thaler.
7. Supply-Side Economics: Associated with the idea of “trickle-down economics,” it posits that
policies that promote business and investment, such as tax cuts for the wealthy, can lead to
economic growth that benefits all segments of society.
8. Marxian Economics: Developed by Karl Marx, this theory focuses on the role of class
struggle and the inherent contradictions in capitalism. It advocates for the eventual transition to
a classless, socialist society.
9. Development Economics: This field explores the economic disparities between developed
and developing nations and examines policies and strategies to promote economic growth and
reduce poverty in the latter.
10. Environmental Economics: It addresses the economic aspects of environmental issues,
including the pricing of externalities like pollution and the allocation of natural resources.