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The Methods of Economists

Updated on June 3, 2009

The Methods of Economists

Positive economics is an approach that uses specific economic indicators such as the price and cost of commodities, employment, and interest rates. Positive economics is used to answer the question "What is the state of the economy?".

Normative economics is a prescriptive approach to economics, providing suggestions or formulating policies that address economic issues. This method is usually used after data is collected and the economic situation has been analyzed. Normative economics is used to answer the question, "What is the most important thing that can be done for the economy?"

The bases for positive and normative economics are economic theories. A theory attempts to explain why events or things occur.

An example of positive economics is the Law of Demand which explains that when the price of a certain commodity goes up, only a few people want to buy it. Normative economics, on the other hand, would suggest that the government adopt policies that would bring the price of that commodity down.

The study of economics involves the use of graphs and charts. These are used to help students further understand economics. A good understanding of mathematics would help students in their study of economics.

Sometimes, economic theories clash because of the bases of their assumptions. Economists always try to prove their assumptions, so when there is a disagreement they turn to data to see whose theory is more acceptable. The acceptance of a theory depends on the economist's ability to prove it with data.

No matter how difficult social problems become, the scientific method can always aid in solving them. The following are the steps in the scientific method of addressing social issues:

1. Identify the problem. It is important to identify and illustrate a problem to be able to give the proper solutions to it. This step involves the study of events and factors that lead and contribute to the problem. It also includes the gathering of data and information that will be used to analyze the problem.

2. Analyze the problem. The data and information collected will be organized into graphs, charts, and other mathematical forms. Through this the nature and elements of the problem become more apparent, making it easier for the analyst to formulate a theory, principle, or policy.

3. Give possible alternative solutions. The theory, principle, or policy formulated from analyzing the problem can be used to make decisions or options that could help solve the problem.

4. Evaluation of alternative solutions. The alternative solutions will be evaluated and the best one will be chosen.

5. Implementation of the best solution

6. Evaluation of the result


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