What is meant by 'Price Theory'?

Question

Accepted Answer

The correct option is 2:

Price Theory is an alternative name commonly used for **Micro Economics**. Microeconomics is the branch of economics that studies the behavior of individual economic agents—consumers, households, firms, and industries—and how they make decisions regarding the allocation of scarce resources. The core focus of this field is the determination of prices and quantities in individual markets. Price theory specifically examines how relative prices are established through the interaction of demand and supply, and how these prices, in turn, influence the production and consumption decisions of individuals and firms. Therefore, all analysis concerning demand, elasticity, market structures (like perfect competition or monopoly), and factor pricing falls under the umbrella of Price Theory.

The incorrect option is 1: Macro Economics. Macroeconomics deals with the economy as a whole, focusing on aggregate phenomena such as national income, inflation, unemployment, and economic growth, rather than individual prices.

The incorrect option is 3: International Economics. This field specifically studies economic interactions between countries, including trade, finance, exchange rates, and international policies, which is a specialized sub-branch, not the core "Price Theory."

The incorrect option is 4: Development Economics. Development economics is concerned with the processes and policies required for economic growth and structural change in low-income countries, focusing on issues like poverty, inequality, and institutional change, rather than the fundamental mechanism of price determination.