It is also named as analytical or abstract or prior method. It consists in deriving conclusions from general truths; it takes few general principles and applies the to draw conclusions. The classical and neo-classical school of economists notably, Ricardo, Senior, J. S. Mill, Malthus, Marshall, Pigou, applied the deductive method in their economic investigations.
Steps of Deductive Method:
(i) The analyst must have a clear and precise idea of the problem to be inquired into.
(ii) The analyst clearly defines the technical terms used in the analysis. Further, assumptions of the theory are to be precise.
(iii) Deduce hypothesis from the assumptions taken.
(iv) Hypotheses should be verified through direct observation of events in the real world and through statistical methods. ego There exists an inverse relationship between price and quantity demanded of a good.

The different types of utility are:
(i) Form utility: An individual consumer obtains utility from a good or service only when it is available in a particular form. Raw materials in their original form may not" possess utility for a consumer. But in their changed forms as they become finished products, they provide utility to him. For example, cotton as a raw material may not possess utility for a consumer; but as it gets a new form as a cloth, it yields the consumer utility.
(ii) Time utility: A sick man derives time utility from blood not at the time of its donation, but only at the operation-time, i.e., when it is used.
(iii) Place utility: A student derives place "utility from a book not at the place of its publication (production centre) but only at the place of his education (consumption centre).
(iv) Service utility: An individual consumer derives service utility from a service made available at the time when he most needs it. For example, clients obtain service utility from their lawyers, patients derive service utility from the doctors and so on.
(v) Possession utility: When a student buys a book or dictionary from a book seller, then only it gives utility.
(vi) Knowledge utility: It is the utility derived by having knowledge of a particular thing. Advertisement serves as a source of information on an object.

The different kinds of goods and services are
(i) Free and economic goods: Free goods are available in nature and they are not scarce. They do not command a price in the market. ego Air and sunshine. Water also an example in the past but at present it has exchange value. So it is not a free good. Economic goods are not available in plenty. They are scarce in supply. Man has to spend money to own or use them.
(ii) Consumer goods and capital goods: Consumer goods directly satisfy human wants, TV, Furniture, Automobile etc. Capital-goods (also called producer's goods) don't directly satisfy the consumer wants. They help to produce consumer goods. For example, machines do not directly satisfy the consumers, but in factories, the manufacturers need them.
(iii) Perishable goods and durable goods: Perishable goods are short-lived. Their lifespan is limited. For example fish, fruits, flower etc., do not have a long life. Durable goods and semi-durable goods have a little longer life-time than the Perishable goods. For example, a table, a chair etc.,

S.No	Positive Economics	Normative Economics
1	Deals with what is, how and why	deals with what ought to be
2	Analyses a problem on the basis of facts and examines its causes.	results are not based on facts but on social, cultural, political and religious considerations.
3		it is subjective
4	(eg) if rate of interest increases we see why & how it can be reduced.	(eg) if rate of interest increases, we see whether it is good or bad

S.No	Micro Economics	Macro Economics
1	Micro Economics is that branch of economics which deals with the economic decision-making of individual economic agents such as the producer, the consumer etc.	Macro Economics is that branch of economics which deals with aggregates and averages of the entire economy. E.g., aggregate output, national income, aggregate savings and investment, etc.
2	It takes into account small components of the whole economy.	It takes into consideration the economy of the country as a whole.
3	It deals with the process of price determination in case of individual products and factors of production.	It deals with general price-level in any economy
4	It is known as price theory	It is also known as the income theory.
5	It is concerned with the optimization goals of individual consumers and producers	It is concerned with the optimization of the growth process of the entire economy.

(i) Psychological - it depends on consumer's mental attitude
(ii) Not equal to usefulness.
(iii) Is personal and relative.
(iv) Is the function of the intensity of human wants.
(v) Cannot be measured objectively; has no ethical significance.

(i) Intangible things are not physical objects but exist in connection to other things (eg) goodwill.
(ii) Heterogeneous services vary. A single service gives different experiences (eg) music.
(iii) Inseparable from their makers: Labour and labourer are inseparable.
(iv) Perishable so they cannot be stored in inventories

Consumption: Human wants come under consumption.
Production: It deals with the transformation of inputs into output.
Exchange: It deals with trade and commerce.
Distribution: It deals with the reward to the factors of production.

(i) Whether to produce more of food, or clothing or housing or luxury goods.
(ii) Whether to produce more agricultural or industrial goods and services.
(iii) Whether to use more resources in education and health or military services.
(iv) Whether to have more consumption goods or investment goods.
(v) Whether to spend more on basic education or higher education.

Definition: "Economics is a science which studies human behaviour as a relationship between ends and scarce means, which have alternative uses."
Explanation: 
(i) Human beings have unlimited wants (ends)
(ii) Supply of resources is scarce in relation to demand.
(iii) Scarce resources have alternative uses.
Assessment:
(i) Robbins says that economics is neutral between ends.
(ii) He focuses on the theory of resource allocation.
(iii) He ignores theory of economic growth and development and macroeconomic aspects.