Answer to Question #143431 in Economics for Neba

Question

What is neoclassical theory? Write the central assumption of the neoclassical theory.

Answer 1

Neoclassical theory (school) is the direction of economic thought, reflecting the ideas of classical political economy and their further evolution and development within the framework of the marginalist school, neoliberal, monetary and other concepts of modern conservatism.

The neoclassical direction studies the behavior of the so-called economic person (consumer, entrepreneur, employee), who seeks to maximize income and minimize costs. The main categories of analysis are limit values.

The firmly rooted neoclassical economic theory forms the fundamental prerequisites that characterize the behavior of economic agents:

- perfect rationality,

- individualism,

- exogeneity and stability of preferences,

- the concept of the invisible hand of the market.

The protective belt of this theory is made up of the prerequisites that characterize the environment in which the agents operate:

- perfect information,

- uniformity of goods,

- complete specification of property rights.