Economic theory

Economic theory (economics) a theory of commercial activities (such as the production and consumption of goods). [The free dictionary]
An economic theory is a set of ideas and principles that outline how different economies function. Depending on their particular role, an economist may employ theories for different purposes. For instance, some theories aim to describe particular economic phenomena, such as inflation or supply and demand, and why they occur.
Other economic theories may provide a framework of thought that allows economists to analyze, interpret and predict the behavior of financial markets, industries, and governments. Often, though, economists apply theories to the issues or occurrences they observe to glean useful insight, provide explanations and generate potential solutions to problems.
Economic theories are important because they provide a way for economists to analyze and predict the behavior of financial markets and the economy. They also offer insights into how the economy works and how it might respond to changes in policy or other factors. For example, economic theories may be used to assess the impact of a tax cut on economic growth or to evaluate the feasibility of implementing a particular type of economic policy.
There are many different economic theories that provide different perspectives on how the economy works. Each of these theories has been developed over time and has been influenced by a variety of factors, including the political, social, and economic conditions of the time. Some have been almost completely abandoned, while others continue to exert a significant influence on economic thought and policy making. [2]