Neoclassical economics

Neoclassical economics is an approach to economics in which the production, consumption, and valuation (pricing) of goods and services are observed as driven by the supply and demand model.[1][2] According to this line of thought, the value of a good or service is determined through a hypothetical maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production. This approach has often been justified by appealing to rational choice theory,[3] a theory that has come under considerable question in recent years.

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Neoclassical economics historically dominated macroeconomics[4] and, together with Keynesian economics, formed the neoclassical synthesis which dominated mainstream economics as "neo-Keynesian economics" from the 1950s to the 1970s.[5] It competed with new Keynesian economics as new classical macroeconomics in explaining macroeconomic phenomena from the 1970s until the 1990s, when it was identified as having become a part of the new neoclassical synthesis along with new Keynesianism. There have been many critiques of neoclassical economics, some of which have been incorporated into newer versions of neoclassical theory, whilst some remain distinct fields.