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Chapter 1: Q4 (page 17)

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

Short Answer

Expert verified

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

01

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.
02

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.

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Most popular questions from this chapter

Pham can work as many or as few hours as she wants at the college bookstore for \(12 per hour. But due to her hectic schedule, she has just 15 hours per week that she can spend working at either the bookstore or other potential jobs. One potential job at a café will pay her \)15 per hour for up to 6 hours per week. She has another job offer at a garage that will pay her \(13 an hour for up to 5 hours per week. And she has a potential job at a daycare center that will pay her \)11.50 per hour for as many hours as she can work. If her goal is to maximize the amount of money she can make each week, how many hours will she work at the bookstore?

Make (a) a positive economic statement of your choice and then (b) a normative economic statement relating to your first statement.

Explain the typical shapes of marginal benefit and marginal cost curves. How are these curves used to determine the optimal allocation of resources to a particular product? If current output is such that marginal cost exceeds marginal benefit, should more or fewer resources be allocated to this product? Explain.

Because investment and capital goods are paid for with savings, higher savings rates reflect a decision to consume fewer goods in the present to invest in more goods for the future. Households in China save 40 percent of their annual incomes each year, whereas U.S. households save less than 5 percent. At the same time, production possibilities are growing at roughly 7 percent per year in China but only about 3.0 percent per year in the United States. Use graphical analysis of ‘present goods’ versus ‘future goods’ to explain the difference between China's growth rate and the U.S. growth rate.

For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units.

a. 3,000 units at which MC = \(10 and MB = \)13.

b. 11 units at which MC = \(4 and MB = \)3.

c. 43,277 units at which MC = \(99 and MB = \)99.

d. 82 units at which MC < MB.

e. 5 units at which MB < MC.

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