October 13, 2010Economic Theoryby EconomyWatch

Economics Theory

Economics Theory explains the principles of commercial activities such as the production and consumption goods, currency exchange and trade. Among the topics addressed around economic sciences on EconomyWatch are: 

Game Theory is a branch of functional mathematics that is applied to study the decision making process in opposing situations. This kind of a situation arises when two individuals having different objectives act on the same system or share a common resource. It basically examines the strategic interactions between two or more agents. Each agent selects a strategy in respect to the other strategy chosen by the other agent. They try to maximize their return through the application of the game strategy. The theory provides strategies to the agents who take decisions in terms of the social situations.


Interest Theory focuses on the charged amount paid against borrowed money. Though money is the most familiar form of asset at the time of lending, yet during arrangements of fiscal lease, Interest Theory considers other asset forms like consumer goods through hire purchase, shares, factories, aircrafts and other primary assets as well. In each of these cases, the rate of interest is charged on the total asset values, just like it is calculated on money.


Supply Theory is one of the fundamental theories of economics. It is also a foundation on which many other theories are based. The supply theory generates lots of other models that are equally important to economics. Supply directly influences resource allocation.


Also See Demand Theory:

Exchange Rate Theory influences the determination of exchange rates and vice versa. The demand for foreign exchange is inversely proportional to the rise of exchange rate. As the exchange rate goes up the demand for foreign exchange declines. The quantity of foreign exchange demanded falls. The supply of foreign exchange shifts depending on demand and not on the exchange rate.


Also See Market Theory:

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