Abstract
Economic theory, a social science, studies resource allocation to achieve goals amidst scarcity. Dominating modern economic thought is the neoclassical school, although the "mainstream" encompasses diverse elements like classical political economy, Keynesianism, and game theory. Divided into micro- and macroeconomics, economic theory's models underpin fields like growth economics, international trade, and public sector economics. Grounded in rational choice theory, refined by behavioral and experimental economics, and utilizing game theory, it employs methodological individualism and mathematical modeling. Key methods include analysis and synthesis, induction and deduction, systems approach, and scientific abstraction. Hypotheses are tested empirically using econometrics, leading to model revision or rejection. Economic theory serves theoretical, ideological, critical, methodological, and prognostic functions. Within the system of economic sciences, fundamental (e.g., economic theory) and applied (e.g., industrial economics) branches are distinguished, with the former focusing on understanding economic laws and the latter on solving practical problems.