Steps of the Deductive Method:
- Step 1: The analyst must have a clear and precise idea of the problem to be inquired into.
- Step 2: The analyst clearly defines the technical terms used in the analysis. Further, assumptions of the theory are to be precise.
- Step 3: Deduce hypothesis from the assumptions taken.
- Step 4: Hypotheses should be verified through direct observation of events in the real world and through statistical methods, (eg) There exists an inverse relationship between price and quantity demanded of a good.
Steps of Inductive Method:
- Step 1: Data are collected about a certain economic phenomenon. These are systematically arranged and the general conclusions are drawn from them.
- Step 2: By observing the data, conclusions are easily drawn.
- Step 3: Generalization of the data and then Hypothesis Formulation Step 4. Verification of the hypothesis (eg.Engel’s law)