Chapter 2The tools of economic analysis David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 6th Edition, McGraw-Hill, 2000... Real and nominal Many economic variables are me
Trang 1Chapter 2
The tools of economic analysis
David Begg, Stanley Fischer and Rudiger Dornbusch, Economics,
6th Edition, McGraw-Hill, 2000
Trang 2Models and data
Model
– a framework based on simplifying
assumptions
– helps to organize our economic thinking
Data
– the economist’s link with the real world
– time series
– cross section
Trang 3Real and nominal
Many economic variables are
measured in money terms
Nominal values
Real values
with a base year
Trang 4Real fares 1979-1998
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… help to analyze patterns and trends in data
Trang 5Economic models:
an example
To organize our thinking we need a
simplified picture of reality
focusing on key elements
Quantity of tube journeys demanded
= f(Prices, income, preferences)
Trang 6Fares and revenues 1979-98
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Diagrams help economists to explore relationships between economic variables
Trang 7Evidence in economics
Scatter diagrams help us to confront economic theory with empirical reality
statistical techniques
Evidence may allow us to reject a
theory
or accumulate support for it