Refer to the chapter in Arnold's textbook titled "Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions".

Use the five-step process outlined in this chapter to produce your own observation, theory and predictions. The process is as follows:

1.It starts with economists making an observation or having a thought

2.The observation or thought leads to a question

3.The economist then builds a theory to try to answer the question

4.Next, if the theory has been built correctly, predictions based on the theory pour forth

5.Finally, data are gathered and analyzed, and the theory's predictions are tested against reality: Either they are borne out, or they are shown to be false

You must produce explain in detail your thoughts throughout the entire process, clearly defining what your observation, question, theory and predictions are.