economic theory

The study of relationships in the economy. Its purpose is to analyze and explain the behaviour of the various economic elements. The body of economic theory can be divided into two broad categories, positive theory and welfare theory. Positive theory is an attempt to analyze the operation of the economy without considering the desirability of its results in terms of ultimate goals. Welfare theory is concerned primarily with an evaluation of the economic system in terms of ethical goals which are not themselves derived from economic analysis. (Source: GREENW)