Economic Theory

Economics is the social science that is concerned with the production, distribution, and consumption of goods and services. The term ecomomics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from oikos (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Current economic models developed out of the broader field of political economy in the late 19th century, owing to a desire to use an empirical approach more akin to the physical sciences.

Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, war, and science. The expanding domain of economics in the social sciences has been described as economic imperialism.

Common distinctions are drawn between various dimensions of economics: between positive economics (describing "what is") and normative economics (advocating "what ought to be"); between economic theory and applied economics; and between mainstream economics (more "orthodox" dealing with the "rationality-individualism-equilibrium nexus") and heterodox economics (more "radical" dealing with the "institutions-history-social structure nexus"). However the primary textbook distinction is between microeconomics, which examines the economic behavior of agents (including individuals and firms, consumers and producers), and macroeconomics, addressing issues of unemployment, inflation, economic growth, and monetary and fiscal policy for an entire economy.