Product Price Theory

Economics is often divided into two parts: positive economics and normative economics. Positive economics deals with the solution to the economic problem, while normative economics deals with how the economic problem should be solved. The impact of price or rent control on income distribution falls under the realm of positive economics, while the desirability of these effects on income distribution is a problem of normative economics.

The major division within economics is between monetary theory and price theory. Monetary theory focuses on the general level of prices, fluctuations in total output, total employment, and related factors. On the other hand, price theory is concerned with the allocation of resources and the relative prices of goods and services. Prices serve three main functions: transmitting information, providing incentives for resource users to act upon this information, and motivating resource owners to follow this information. Milton Friedman's classic book serves as a foundational text for understanding the role of prices in economics.

Economics is not limited to economic problems alone. As a social science, it primarily focuses on economic issues that require cooperation and interaction among individuals. It addresses problems involving individual behavior only to the extent that it affects others. "Price Theory" specifically examines how a society tackles its economic challenges, rather than dealing with abstract economic problems.

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