Deductive Method of Economic Analysis, Steps, Advantages & Disadvantages

Fri, 07/05/2013 - 09:06 -- Umar Farooq

Deductive method is known by variety of its names like analytical, abstract or prior method. This method is also known as hypothetical method. This method is based on the process of model building where conclusions are derived from general principles. When economic analysis is conducted through deductive method, the economic analyst has to proceed from general to particular. For example there is a general principle that increase in the cost of inputs will lead to increase in the price of relevant output (product) and this general principle is known as Cost Push Inflation. Now if the theme of cost push inflation is adopted for a particular product like computers or cars, the process will be known as deductive method. Mostly the classical and neo-classical economists like Ricardo, Malthus, Senior, J.S.Mill, Cairnes, Marshall, and Pigou conducted their study of economic analysis on deductive method.

Steps Involved in Deductive Method

The following steps are taken into consideration while conducting analysis through deductive method;

  1. Identification of problem to be probed into
  2. Definition of technical terms
  3. Deducing hypothesis from the assumptions
  4. Testing of hypothesis
  5. It means that the nature of problem should be clear to the analyst.
  6. It means that the technical terms used during the analysis must clearly be defined.
  7. It means that accurate hypothesis may be concluded from assumptions.
  8. It means that the validity of hypothesis in practical may be tested by the use of statistical techniques.

Advantages of Deductive Method

Related pages

aristotle criticism of platodisadvantages of fifth generation computersdivine rights of kings definitiondefinition for unitary governmenttribal religion definitionpsychology meaning in hindicultural ethnocentrism definitiondefinition of supply curvehorizontally integrated firm examplearistotle contribution to philosophykohler definitionfederalism importancebritish constitution notescultural lag sociologyexample of transfer propagandathree types of perceptual constancydisharmony meansbenefits of ethnocentrismdefine hypothesefreuds psychosexual stages of developmentresidual claim definitionpsychosexual development by freudsocialism definition in hindiwhat does socialisation meandiscuss the advantages and disadvantages of the partnershipindividuals meaning in hindiwhat is the meaning of socializedefine spairnon probability quota samplingwhat is the meaning of socializemax weber short biographycodified constitution advantages and disadvantagespolity definition aristotlefactors affecting international marketingautocratic teaching styledefine barter trade systemthe psychosexual stages of developmentav aids in teachingtypes of sunnahdefine pith helmetdefinition of single proprietorshipweber's theory of social actionsources of islamic jurisprudencewhat is the definition of nomadicmicroenvironment and macro environment in marketingstp marketnon-probability sampling techniques with examplesdefine encoding and decoding in communicationjurisprudence defcapitalist society disadvantagessociology of demographyadvantages and disadvantages of command economydefinition stpthe managerial gridbureaucracy max weberadvantages mixed economybudget line in microeconomicsexplain the concept of popular sovereigntywhat is the meaning of casteconcept of cultural lagmichael porter value chain analysisimportances of languageobservational methods psychologydescriptive research and exploratory researchdefinition stagflationjohn whitmore coaching definitiondouglas mcgregor theoryadvantages of consumer sovereigntypiaget meaningwhat is the process of cultural diffusioncontagious magic definitionadvantages and disadvantages of social surveysconformity sociologydisadvantages of democracyadam smirh