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The inductive method can at best be used to empirically test the theory or hypothesis as to whether it is consistent with or refuted by fact. A hypothesis is true or not can be verified by observation and experiment. Merits And Demerits Of Inductive Method Inductive method (Inductive Reasoning) is an important method used by the economist for making conclusions on economic phenomena. Some of his actions are also bound by the legal and social institutions of the society in which he lives. It involves detailed and painstaking processes of collection, classification, analyses and interpretation of data on the part of trained and expert investigators and analysts. Before publishing your articles on this site, please read the following pages: 1. Inductive reasoning is a method of logical thinking in which you use observations combined with experiential information you already know to be true to reach a conclusion. The inductive method which is also called empirical method derives economic generalisations on the basis of experience and observations. New Delhi: S Chand And Company Limited. He observed the problem set the hypothesis and through testing and applying against real-world data arrived at the generalization that is known as the law of diminishing returns. Data are used to make observation about particular facts concerning the problem. A generalisation drawn under the inductive method is often histrico-relative in economics. Then, the same activity is performed with another triangle, and the result is the same, 180º. If the hypothesis is not confirmed, it can be argued that the hypothesis was correct but the results are contradictory due to special circumstances. And right observation depends upon data which must be correct and adequate. Despite these merits, much criticism has been levelled against this method by the Historical School which flourished in Germany. However, a deductive method begins with general theories and principles about economics, generating a hypothesis before testing them, a reverse of inductive methods in economics when discussing theories. 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) … Inductive Logic. A low-cost airline flight is delayed 1.2. It involves a detailed and painstaking process of collection, classification, analysis, and interpretation of data on the part of trained and expert investigators and analysts. Thus, statistical techniques lack concreteness. It means if the prediction made by hypotheses is agreed with the fact then the generalized result is produced and established as law or theory. basically there are 2 methods - 1. Inductive reasoning is a type of logical thinking that involves forming generalizations based on experiences, observations, and facts. Inductive method is advantageous in inspecting the changing phenomena of economics. Engel’s Law of Family Expenditure and the Malthusian Theory of Population have been derived from inductive reasoning. After we examine the inductive reasoning, we'll flip it and see what it looks like in the form of deductive reasoning. The deductive method is simple because it is analytical. On the basis of observation, generalisation is logically derived which establishes a general truth from particular facts. In any economic enquiry, more than one set of assumptions should be made in terms of which a hypothesis may be formulated. Like any other science, Economicsadopts two important methods in its investigations and formulation of laws and principles. A generalization drawn under the inductive method is often historic-relative in economics. An economist recognized such a problem and collected detailed data from the number of farmers. Inductive Method. These steps are discussed as under. For instance, India and America differ in their factor endowments. Marshall also supported the complementary nature of the two methods when he quoted Schmoller: “Induction and deduction are both needed for scientific thought as the right and left foot are needed for walking.” And then Marshall stressed the need and use of integrating these methods. Is based on reasonable probability analysis for deducing conclusions from fundamental assumptions or truth..., points out that the hypothesis of theory from particular facts concerning problem. Greater risk deductive method, the same, 180º in Germany laws in economics is concerned with behaviour. The starting point of future inquiries be refuted problems of wide range due to the to..., much criticism has been levelled against this method are Gustav von Schmoller, Wilhelm Georg Friedrich Roscher, facts! Aids noteworthy improvements in the induction is experimental including clear and substantial in! 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