neoclassical economic theory

Neoclassical economic theory is a framework for understanding how supply and demand determine prices and allocate resources in a market economy. It assumes that individuals act rationally, making decisions to maximize their utility or satisfaction. Firms aim to maximize profits by producing goods efficiently. This theory emphasizes the role of competition in promoting innovation and efficiency. Key concepts include marginal utility (the added satisfaction from consuming one more unit) and marginal cost (the cost of producing one more unit). Overall, neoclassical economics helps explain how markets function and how decisions are made by consumers and producers.