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Classical and Neoclassical Schools of Economics

Classical and Neoclassical

Classical and Neoclassical Schools of Economics

Economics is a social science directed at the satisfaction of needs and wants through the allocation of scarce resources which have alternative uses. Classical and neoclassical are two main schools of economics.

Classical and Neoclassical Thoughts of Economics

Classical Economics

The fundamental principle of the classical theory is that the economy is self‐regulating. Classical economists maintain that the economy is always capable of achieving the natural level of real GDP or output, which is the level of real GDP that is obtained when the economy’s resources are fully employed.

The main idea of the Classical school is that markets work best when they are left alone, and that there is nothing but the smallest role for government. The approach is firmly one of laissez-faire and a strong belief in the efficiency of free markets to generate economic development.

Basic Assumptions

Neoclassical Economics

Neoclassical economics emerged in around 1900 to compete with the earlier theories of classical economics. It is a broad theory that focuses on supply and demand as the driving forces behind the production, pricing, and consumption of goods and services.

Neoclassical economics stipulates that a product or service often has value above and beyond its production costs.

Basic Assumptions

Classical and Neoclassical Economics: An Overview


Economic Institutions

Financial Administration

Branches/Modes of Economics

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