BATICULON,JLYNN R.

BSE-1C FIRST YEAR

ECONOMIC THEORY
-a model that is used to explain how economies function as well as describe
various economic phenomena.

TYPES OF ECONOMIC THEORY

-There's
an extensive collection of theories available to professionals when
analyzing economic activity. Here's a brief explanation of 11 foundational theories
in economics:

1. SUPPLY AND DEMAND

-Supplyand demand are a microeconomics theory that suggests price
determination occurs when consumers demand a good equal the quantity supplied.

2. CLASSIC ECONOMIC
-Classical economics, a theory developed by Adam Smith and John Stuart
Mill, asserts that market economies are self-regulating systems governed by
production and exchange laws.

3. KEYNESIAN ECONOMIC
-Keynesianeconomics is a set of macroeconomic theories and models that
explain how aggregate demand, the total spending of an economy, influences
economic output and inflation.
Keynesian economics suggests that aggregate demand doesn't necessarily
determine an economy's productive capacity, but rather depends on public and
private factors, leading to employment and output changes.
4. MALTHUSIAN ECONOMIC
-Malthusian economics suggests that population growth is exponential, but
food and resource supply growth is linear. This theory supports population control
to prevent unchecked growth rates, but concerns about environmental degradation,
resource depletion, and scarcity persist.

5. MARXISM

-Marxism is a socioeconomic theory that explains capitalism's impact on

economic development, labor, and productivity. It posits a capitalist society with a
ruling class and a working class, with the bourgeoisie controlling production and
wages, potentially leading to revolution.

6.LAISSEZ FAIRE CAPITALISM

-Laissez-fairecapitalism is a free-market theory that advocates for economic
prosperity in systems where governments leave alone, promoting self-regulation
through competition. However, this theory lacks inherent protection for vulnerable
populations.

7.MARKET SOCIALISM
-Market socialism, also known as liberal socialism, is an economic system
combining socialist planning and free enterprise, where capital is cooperatively
owned, and profits are directed towards various channels.

8.MONETARISM

-Monetarism is a macroeconomic theory that suggests governments can

achieve economic stability by controlling monetary supply. It posits that the total
amount of money circulating in an economy determines growth and employment,
inflation, and production rates, based on the quantity theory of money.

9.TRAGEDY OF THE COMMONS

-The tragedy of the common’s theory explains the economic problem of
resource over-exploitation due to unrestricted access. It suggests that individuals
with limited access may act in self-interest, leading to resource scarcity and
influencing sustainable development practices and environmental protection.

10.NEW GROWTH THEORY

-New growth theory suggests that human desire drives productivity and
economic growth, focusing on entrepreneurship, knowledge, innovation, and
technological advancement, as competition flattens profit and drives people to
maximize potential.

11. MORAL HAZARD THEORY

-Moral hazard is an economic phenomenon where parties enter contracts in
bad faith, often maximizing profit without considering moral considerations. This
occurs when a corporation increases risk exposure, with the other party typically
bearing the costs.