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Lecture 1

Lecture 1 - Moshe Buchinsky Department of Economics UCLA...

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Moshe Buchinsky Economics 103 Department of Economics Introduction to Econometrics UCLA Fall, 2011 Lecture Note 1 An Introduction to Econometrics 1T o p i c s t o D i s c u s s 1. Why Study Econometrics 2. What is Econometrics About 3. The Econometric Model 4. How Are Data Generated 5. Economic Data Types 6. The Research Process 7. Writing An Empirical Research Paper 8. Sources of Economic Data 2W h y S t u d y E c o n o m e t r i c s Econometrics f lls a gap between being a “student of economics” and being a “practicing economist” It lets you tell your employer: “I can predict the sales of your product” “I can estimate the e ± ect on your sales if your competition lowers its price by $1 per unit” “I can test whether your new ad campaign is actually increasing your sales” Helps you develop “intuition” about how things work and is invaluable if you go to graduate school Econometrics is about how we can use theory and data from economics, business, and the social sciences, along with tools from statistics, to answer “how much” questions. 1
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In economics we express our ideas about relationships between economic variables using the mathematical concept of a function Frqvxpswlrq = i ( Lqfrph ) T g = i ¡ S>S v S F >Lqfrph ¢ T v = i ³ S>S F >S i ´ 2.1 Every day, decision-makers face “how much” Acitycouncilpondersthequestionofhowmuchviolentcrimewillbereducedifanadditional million dollars is spent putting uniformed police on the street The owner of a local Pizza Hut must decide how much advertising space to purchase in the local newspaper, and thus must estimate the relationship between advertising and sales Louisiana State University must estimate how much enrollment will fall if tuition is raised by $300 per semester, and thus whether its revenue from tuition will rise or fall for the detergent Tide, and how much to invest in a new plant and equipment Arealestatedevelopermustpredictbyhowmuchpopulationandincomewillincreasetothe south of Baton Rouge, Louisiana, over the next few years, and whether it will be pro f table to begin construction of a gambling casino and golf course You must decide how much of your savings will go into a stock fund, and how much into the money market. This requires you to make predictions on the level of economic activity, the rate of in
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Lecture 1 - Moshe Buchinsky Department of Economics UCLA...

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