Question

What are the key elements of the scientific method, and how does this method relate to economic principles and laws?

Short answer

The key elements of the scientific method are as follows.

• Observing an outcome
• Formulating a hypothesis
• Hypothesis testing
• Accepting/rejecting the hypothesis
• Testing the hypothesis with different variables
• Providing a general theory or conclusion based on the results

Economic principles and laws follow these scientific methods before generalizing the results obtained from the analysis.

Step-by-step solution

Key elements of the scientific method

• Observing an outcome: Before interpreting a theory for its outcome or analysis, it is observed thoroughly to find the possible reasons behind it.
• Formulating a hypothesis: A hypothesis is formulated based on observation. The hypothesis is defined by picking a possible cause that can affect the outcome.
• Hypothesis testing: The hypothesis is tested in a controlled environment to witness the changes in the effect with a change in the causes.
• Accepting/rejecting the hypothesis: The hypothesis is accepted/rejected or modified based on the result when compared to the table values.
• Testing the hypothesis with different variables: The same procedure is carried out with other samples to check if the hypothesis is true for them or not.
• Conclusion: A general theory is concluded if the hypothesis is analyzed to be true for most of the samples.

Relation of the scientific method with the economic principles and laws

The scientific method helps in formulating a theory or a general conclusion. Economic behaviors are also tested under these scientific methods to conclude a particular theory. If a theory is tested very well and is acceptable for most outcomes, it becomes a principle or law.

The principles and laws are inducted into the models to provide simplified explanations for individuals' or institutions' economic decisions while purchasing, exchanging, or consuming goods or services. They further help in explaining and predicting the economic actions of society for economic activities. In this way, scientific methods are related to economic principles and laws.