Answer to Question #30587 in Microeconomics for Alie
What are the key elements of the scientific method and how does this method relate to economic principles and laws?
The key elements of the scientific method are the observation of real world behavior and outcomes. Based on those observations, formulating a possible explanation of cause and effect happens which is a hypothesis. Next, testing this explanation by comparing the outcomes of specific events to the outcome predicted by the hypothesis. Then, accepting, rejecting, and modifying the hypothesis, based on these comparisons. Finally, continuing to test the hypothesis against the facts. If favorable results accumulate, the hypothesis evolves into a theory. A very well tested and widely accepted theory is referred to as an economic law or an economic principle. An economic principle is a statement about economic behavior or the economy that enables prediction of the probable effects of certain actions.