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Tools For Economic Analysis
Tools For Economic Analysis
Tools For Economic Analysis
Like scientists, economists and economic analysts observe the world and construct
theories about why things happen or whether specific relationships exist. After an economist
constructs a theory, he tries to find information that supports or disproves his theory.
Although an economist can never prove her theory definitively, her theory becomes more
persuasive as she finds more evidence to support it..
Graphs
Creating a graph is a great way for economic analysts to show a relationship between two
variables. For example, an economist who wants to analyze unemployment statistics over 50
years can create a graph with the year (e.g. 2000, 2001) on the x-axis and the rate of
unemployment on the y-axis.
Mathematical Analysis
Most modern-day economic analysis involves a lot of mathematical calculation. One
popular mathematical calculation is linear regression analysis (LRA). LRA allows economists
to determine the extent to which one variable affects the others. For example, if you want to
know how much the weather affects attendance at baseball games and the happiness of the
fans at the game, you can run a LRA. Such analysis is complicated, but rigorous study of
mathematics makes it a lot easier.