Economic Methodology is the science of economic inquiry: observation, hypothesis, theory-building, testing, and revision. Approaches: Deductive (theory to specific cases), Inductive (observations to general theory), Positive economics (objective analysis), Normative economics (value judgments). Methods: Statistical analysis, econometrics, case studies, surveys, experimental economics. Scientific method: Define problem, form hypothesis, collect data, test hypothesis, draw conclusions. Challenges: Human behavior unpredictability, difficulty isolating variables (unlike physics), ethical constraints on experiments. Business application: Market research (observation), demand forecasting (hypothesis testing), strategy testing (simulation). ICAI focus: Understanding limitations, distinguishing approaches, recognizing pitfalls. Exam tip: Positive analysis comes before normative; you cannot prescribe without understanding what is. Questions about "scientific approach" often test understanding of hypothesis testing.