Written by the Fiveable Content Team • Last updated September 2025
Verified for the 2026 exam
Verified for the 2026 exam•Written by the Fiveable Content Team • Last updated September 2025
Definition
Economic theories are models and principles that explain how individuals, businesses, and societies make decisions about the allocation of limited resources to satisfy their wants and needs.
Related terms
Supply and Demand: The relationship between the availability of a product or service (supply) and how much people want it (demand).
Opportunity Cost: The value of the next best alternative forgone when making a choice.
Market Equilibrium: The point at which quantity demanded equals quantity supplied in a market.