a deductive method only
both inductive and normative methods
a normative method only
both inductive and deductive methods
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A scientific approach in economic analysis is positive economics — it is objective, fact-based, and follows the scientific method. This requires both:
- Inductive method: Collecting specific real-world data/observations first, then generalising to form theories or laws (e.g., observing many price changes and then stating the law of demand).
- Deductive method: Starting from general theories or assumptions and logically deducing specific predictions that can be tested against facts (e.g., assuming rational behaviour to predict how consumers will react to a price increase).
Economists constantly move between the two (induction → theory; deduction → empirical testing), which is why economics is considered a social science.
