The two broad classifications of economics are microeconomics and macroeconomics. Both are based on certain assumptions which include:
- Institutional assumptions- These are linked to assumptions about social, political, and economic factors. For instance, a society which is capitalist or communist.
- Structural assumptions – It has to do with topography, nature, gender, and technological advancements, among other things.
- Ceteris paribus assumption- It implies that if other things are maintained constant, such as many factors in the law of demand, it can be defined.
- Psychological assumptions- It is based on human decision-making and behaviour. For example, utility, rational choice theory etc.
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