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Economic Generalisations and Inductive vs Deductive Method

Discuss about the Policy Framework and Markets.

The basic meaning of the market is very common. A market is a place where the marketers buy and sold different goods or products. But the meaning of the market in economics is different as per to the different Economists. Economic market means sellers and buyers and commodities of the same thing are in face to face opposition with each other. There are different types of a market such as product market, free market, factor market, whole market and imperfect market, etc. In the assignment, the discussion is about on the stock market. In this type of market, the investors buy and sell stocks for earning the profit. In this market, the buying and selling are required to constitute a proper market. In this marketplace, someone has to be willing to sell and buy the stocks. Then the market can be active all over the world.

The economic generalisations demonstrate the statements or laws of tendencies in different sectors of economics like production, exchange, consumption and distribution of the earnings. Economic law or generalisations are the declarations of uniformities that helps to describe the human attitude in the apportionment of the different resources in the alternative ends. The most significant process of economic analysis are two types; one is the deductive method, and the other one is the inductive method. Generalisation in economics has been come from in two processes such as deductive method and inductive methods.it can also be called prior, the analytical and abstract method which re[resents a general outlook to the accomplishment of theories and generalisations( Allen, WB, Weigelt, K, Doherty, N & Mansfield, E 2012).

  • Necessary and important mathematical procedures can be applied to get the theories and laws of economics.
  • Deductive methods are concerned as less expensive and less time-consuming process.
  • The deduction methods are completely useful for constructing economics theories. As there are limited scopes for the maintained assessment in economics, this deduction procedure is perfectly useful.
  • Sophisticated mathematical process in the deductive method helps the economists to know the exactness and accuracy in economic theories and principles.

The another name of an inductive method is the empirical method that is derived from economic generalisations. The generalisations are based on the observations and experiences. In this procedure, detailed information is gathered in the certain economic condition. After collecting the information, the effort should be made to get certain generalisations. These certain generalisations follow the collected information or data.

In this approach, three different ways can be utilised to derive economic theories and principles. Those three ways are

  1. Experimentation
  2. Observations
  3. Econometric or statistical method

Evaluation of inductive method: to get economic generalisations, the collection of complete data and usage of statistical measures are used for setting the relationship between the facts that are being made increasingly. Some latest researches in the sector of macroeconomics like the feature of consumption activities describe the relation between the earning and consumption. It determines the investment in the stock market has been got through the application of inductive method mainly.

The Role and Impact of Government Intervention on the System

Government intervention indicates to the directions where the government interferes, control or regulates the several activities which are taken by individuals or the business organisations. The effect of government intervention can be negative or may be positive. Governments should maintain a standard level of attachment in the different actions of various organisations. They attain the qualities by forming and applying different rules and regulations that the inhabitants should follow and maintain. The sovereign power of the governmental authority should be used for fulfilling noble goals.

  • The main aim of the government is to improve the infrastructure of the economic market and different business organisations.
  • The government intervene in the markets to develop common economic fairness and transparency.
  • The governments always attempt to control the inequities in the market. They focus on these inequalities and try to maintain those problems through taxation, subsidies and regulation processes.
  • The government can sometimes intervene to promote some other aims like political advancement and unity. The governments take the significant responsibilities for the stock market
  • One of the best and common evaluated reasons is that the governments intervene in the market for maximising social wellbeing. The government intervention should always be focusing on the social welfare.
  • One of the significant roles of the government is to maintain the value of the currency, protect asset rights and uphold the rules and regulations of the law.

Governments can apply a Fiscal policy to change the demand level for various products and the demand pattern in the economy (McTaggart, D, Findlay, D & Parkin, M 2012). Indirect taxation can be utilised to increase the price value of the demerit products. Then the consumers reduce their demands in this situation. The governments provide subsidies for some necessary and good products that help the customers to buy those easily. The subsidies are applied to boost up the output and consumption of goods with certain externalities. Subsidy increases the production supply in the market. The consumers get help from the government by this effective policy. Tax relief also helpful for the investors who can get benefit by the application of this policy in the stock market.

Policy frame work is effective for the commercial stock market. It helps to improve productive, allocative and productive efficiency (Keat, PG & Young, PK 2009, Managerial economics). Different policies are significant for the stock market which gives profitable earning to the investors. Government interventions help to the perfect equal products as per the demands of the customers.

Macroeconomics refers to the explanations and analysis of some process which are concerning aggregates. Aggregate economic attitude is the complete behaviour of each and every person in the economic market. The macro economy is the topic based on the economic behaviour totally, and the different policies are measured by the government. Those policies can be applied and used by the governments to influence the macro economy( Lowe, P. (2013) Productivity and Infrastructure). It calculates the rates of inflation and unemployment, total output, exchange rates, etc. if there is any disequilibrium in the stock market, the policies help to rectify the errors in the financial marketplace. In this difficult condition, the governments may have to change the past policies and come back with some new models and policies to control the situation (Banks, G. (2012) Productivity policies: the ‘to do’ list, Economic and Social Outlook Conference 'Securing the Future' Melbourne, November 2012).

An Understanding of the Macro Economy

Macro economy analyses and describes some particular procedures which concern individuals like individual firm, individual customers, individual market. It also concerns with the determination of price value in the private marketplace. The macro theory defines the economy in the long and short run. The long run concerns with the economic growth and the short run concerns with the movements in the total output, business cycle, exchange rates, rates of inflation and unemployment Gerber,( J 2013, International economics),.

Interdependence: macro economy shows the interdependence between the various sectors inside and outside of the economic market. It is beneficial as it indicates the changes in the different sectors.

Non-experimental: the macro economy cannot consume maintained scientific experiments, but it focuses on the deduction and observations.

Aggregate analysis: macroeconomics demonstrates the aggregate or average economic sectors (Gans, J King, S Stonecash, RE & Mankiw, N 2014, Principles of economics). The various parts of the macro economy are national income, recession, inflation, economic growth, total savings, trade, monetary policy, fiscal policy, total investments, etc.

Policy based: economic module is based on a mainly Macroeconomic evaluation. This analysis includes five principle areas that are called ‘magical pentagon'. Magical Pentagon is stable prices, good economic development, full employment, equitable distribution of earning, external equilibrium.

Regarding this policy, there are two groups of thought, these are non-interventionist groups or monetarist, and interventionist groups or the non-monetarist groups( Baye, MR 2015, Managerial economics and business strategy).

The interaction between the consumers and competitors with an organisation may have the positive or the negative effects both. Small business investors in the stock market cannot change the market structures. So, they have to analyse and follow how this stock market structure affects the business or on the consumers. The new investors should identify the negative aspects and then they must change those aspects. The new investors have to change their business strategy to the stock market and to reduce those negative aspects effectively(Faarnham, G 2014, Economics for managers).

There are various approaches to the different market structures that are the main reasons for affecting  the business and the investors or the customers. The different reasons are market segmentation and accessibility, market characteristics and size, policy and regulatory influences and competitive structures of the marketplace( Faarnham, G 2014, Economics for managers). These are the main factors which are affecting the business and new investors in the economy of the stock market.

References:

Allen, WB, Weigelt, K, Doherty, N & Mansfield, E 2012, Managerial economics: Theory, applications and cases (International Student Edition), WW Norton, New York,NY.

Banks, G. (2012) Productivity policies: the ‘to do’ list, Economic and Social Outlook Conference 'Securing the Future' Melbourne, November 2012 - downloadable from www.pc.gov.au/speeches (see also various papers under Structural Change in Australia)

Baye, MR 2015, Managerial economics and business strategy, 8th edn, McGraw Hill, New York, NY.

Faarnham, G 2014, Economics for managers, 3rd edn, Pearson Education, London.

Gans, J King, S Stonecash, RE & Mankiw, N 2014, Principles of economics, 6th edn, Cengage Learning Australia,Melbourne.

Gerber, J 2013, International economics, 6th edn, Pearson Education, Upper Saddle River, NJ.

Keat, PG & Young, PK 2009, Managerial economics, 7th edn, Pearson Education, Upper Saddle River, NJ.

Layton, A Robinson, T Tucker, I 2014, Economics for today, J1h edn, Cengage Learning Australia , Melbourne.

Lowe, P. (2013) Productivity and Infrastructure - can be downloaded from rba.gov.au/speeches/2013

McTaggart, D, Findlay, D & Parkin, M 2012, Economics, 7th edn, Addison-Wesley, Sydney

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