Editing Neoclassical economics (section)

=== Assumptions and objectives ===
It was expressed by [[E. Roy Weintraub]] that neoclassical economics rests on three assumptions, although certain branches of neoclassical theory may have different approaches:<ref>{{Cite web |title=Neoclassical Economics, by E. Roy Weintraub: The Concise Encyclopedia of Economics {{!}} Library of Economics and Liberty |url=http://www.econlib.org/library/Enc1/NeoclassicalEconomics.html |access-date=2024-11-29 |website=www.econlib.org}}</ref>

* People have [[Rational choice theory|rational preferences]] between outcomes that can be identified and associated with values.
* Individuals [[utility maximization|maximize utility]] and firms [[profit maximization|maximize profits]].
* People act independently on the basis of [[Perfect information|full and relevant information]].

From these three assumptions, neoclassical economists have built a structure to understand the allocation of scarce resources among alternative ends—in fact, understanding such allocation is often considered the definition of economics to neoclassical theorists. Here is how [[William Stanley Jevons]] presented "the problem of Economics".

<blockquote>Given, a certain population, with various needs and powers of production, in possession of certain lands and other sources of material: required, the mode of employing their labor which will maximize the utility of their produce.<ref>[[William Stanley Jevons]] (1879, 2nd ed., p. 289), [https://books.google.com/books?id=aYcBAAAAQAAJ The Theory of Political Economy] {{Webarchive|url=https://web.archive.org/web/20231011193705/https://books.google.com/books?id=aYcBAAAAQAAJ |date=October 11, 2023 }} Theory of Political Economy''.] Italics in original.</ref></blockquote>

From the basic assumptions of neoclassical economics comes a wide range of theories about various areas of economic activity.  For example, profit maximization lies behind the neoclassical [[theory of the firm]], while the derivation of [[demand]] [[demand curve|curves]] leads to an understanding of [[consumer good]]s, and the [[Supply (economics)|supply]] curve allows an analysis of the [[factors of production]].  Utility maximization is the source for the neoclassical theory of consumption, the derivation of demand curves for consumer goods, and the derivation of labor supply curves and [[reservation price|reservation demand]].<ref>[[Philip H. Wicksteed]] ''The Common Sense of Political Economy''</ref>