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Theory
 Theories are sets of concepts and
generalizations so arranged to
explain and predict possible
relationship among phenomena.
 A theory is a simplified
representation of how two or more
variables interact with each other
 simplify it down to its essentials.
 A theory or model may be expressed in
words, charts, diagrams or in
mathematical form
 According to Kindleberger, “An economic
theory is a statement of relationship
among economic variables.
 It is a simplified representation of a real
situation.
 Economic theories are broadly divided
into two groups- Micro and Macro
economic theories.
 A micro economic theory explains the
relationship between two individual
variables.
 A macro economic theory expresses the
relationship between two aggregate
variables
The construction of an economic theory
is just like the step by step construction
of a building.
Generalization form the hypothesis
Testing and verification
Characteristics of Economic
theories
An economic theory explain
economic situation.
Economic theories, though
scientific in character, are
being revised and sometimes
refuted.
Statistically hypothetical
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Economic theory

  • 1.
  • 2. Theory  Theories are sets of concepts and generalizations so arranged to explain and predict possible relationship among phenomena.  A theory is a simplified representation of how two or more variables interact with each other  simplify it down to its essentials.  A theory or model may be expressed in words, charts, diagrams or in mathematical form
  • 3.
  • 4.  According to Kindleberger, “An economic theory is a statement of relationship among economic variables.  It is a simplified representation of a real situation.  Economic theories are broadly divided into two groups- Micro and Macro economic theories.  A micro economic theory explains the relationship between two individual variables.  A macro economic theory expresses the relationship between two aggregate variables
  • 5. The construction of an economic theory is just like the step by step construction of a building. Generalization form the hypothesis Testing and verification
  • 6. Characteristics of Economic theories An economic theory explain economic situation. Economic theories, though scientific in character, are being revised and sometimes refuted. Statistically hypothetical