Neoclassical Economics
Categories: Econ
Neoclassical economics is probably what you were taught in Econ 101: individual economic actors are rational, seeking to maximize their utility (and profits, for firms), in addition to the basic concepts of supply and demand. With supply and demand comes market equilibrium, price takers, and market competition creating efficient outcomes.
Neoclassical economics also errs more on the side of consumers affecting the prices of goods via demand...over the idea that a thing’s value comes from the input costs (materials and labor).
While neoclassical economics has had quite the impact on the study of the economy, it’s no secret that people aren’t rational, as neoclassical economics assumes.
Neoclassical economics is a nice and easy way to teach, with the clean graphs and concepts, but has been criticized for the lack of real-world applications.