The development of an economic hypothesis through intuition, insight, or logic is associated with

Analyze the question The question asks which method is used to develop an economic hypothesis from intuition, insight, or logic. This is about the methods of economic analysis.

Explain the concept There are two main methods of reasoning in economics:

• Deduction: You begin with general assumptions or principles (often from intuition, insight, or logic) and reason towards specific conclusions. The hypothesis is formed first, then tested against facts. Example: "If price rises, quantity demanded falls" is reasoned out logically, then tested.
• Induction: You begin with specific observations or data and move to a general conclusion. Facts come first, and the theory is built from them. Example: observing price and sales figures in many markets, then concluding that demand falls as price rises.

Policy economics and normative economics deal with value judgements ("what ought to be") and recommendations. They are not methods of developing hypotheses.

Solution

1. The hypothesis comes from intuition, insight, or logic, not from collected data.
2. Reasoning that starts from general ideas or assumptions and works toward specific conclusions is deduction.
3. Induction would need observation and data first, so it is ruled out.
4. Options B and C are not reasoning methods, so they are ruled out too.

Answer: A. Deduction

Exam tip Remember: Deduction = Dream up the theory first, then test it. Induction = Inspect the facts first, then build the theory.