Economic theory is a branch of economics that studies the behavior of individuals and organizations in response to economic incentives. It seeks to understand how individuals make decisions about allocating scarce resources to maximize their utility or welfare, and how markets work to coordinate these decisions. Economic theory also explores the impact of government policies, technological change, and other external factors on the economy. Key concepts in economic theory include supply and demand, market equilibrium, price theory, game theory, and the role of incentives in shaping economic behavior.