The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry).
Neoclassical Economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by cost-constrained firms employing available information and factors of production, in accordance with rational choice theory. Neoclassical economics dominates microeconomics, and together with Keynesian economics forms the neoclassical synthesis which dominates mainstream economics today. Although neoclassical economics has gained widespread acceptance by contemporary economists, there have been many critiques of neoclassical economics, often incorporated into newer versions of neoclassical theory as awareness of economic criteria changes.
Classical and Neoclassical Economics
Economic history is marked by many revolutions and paradigm shifts. In the early 20th century, the shift from classical to neoclassical economics brought about numerous changes in the way people thought about wealth. The main intellectual shift ushered in by neoclassical economics was the idea of value as a function of perception, a sharp departure from the classical theory of value as cost of production. Many of the differences between classical and neoclassical economics can be attributed to this shift.
• The main difference between classical and neoclassical economics...
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