General equilibrium theory explains how markets work on a large scale. It was developed by economists in the late 19th and early 20th centuries and refined in the 1950s. The theory shows that in a competitive market, there is a balance where everyone is as happy as possible (First Welfare Theorem). It also proves that this balance can be reached even with some trading between people (Second Welfare Theorem). These ideas are used in many areas like finance, trade, and economics.