Ch02 - 2.5 Economic models: an example To organize our...

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Chapter 2 The tools of economic analysis David Begg, Stanley Fischer and Rudiger Dornbusch, Economics , 6th Edition, McGraw-Hill, 2000 Power Point presentation by Peter Smith
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2.2 Models 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
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2.3 Real and nominal Many economic variables are measured in money terms Nominal values measured in current prices Real values adjusted for price changes compared with a base year measured in constant prices
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2.4 Diagrams Real fares 1979-1998 0 2 4 6 8 10 12 14 16 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 Real fare (1998 pence) … help to analyze patterns and trends in data
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Unformatted text preview: 2.5 Economic 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) 2.6 Relationships Fares and revenues 1979-98 9 10 11 12 13 14 15 500 600 700 800 900 1000 Real revenue (mn 1998 prices) Real fare (1998 pence) Diagrams help economists to explore relationships between economic variables 2.7 Evidence in economics Scatter diagrams help us to confront economic theory with empirical reality Econometrics takes this further using statistical techniques Evidence may allow us to reject a theory or accumulate support for it...
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Ch02 - 2.5 Economic models: an example To organize our...

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