APPLIED ECONOMICS

The term “applied economics” is believed to have started 200 years ago in the writings of two
economists:

JEAN-BAPTISTE SAY (1767-1832)

JOHN STUART MILL (1806-1873)

Applied economics - is the study of economics in relation to real world situations. It is the application of
economic principles and theories to real situations, and trying to predict what the outcomes might be.
SIMPLER DEFINITION

Applied economics – is the study of observing how theories work in practice.

WHAT IS THE IMPORTANCE OF APPLIED ECONOMIC APPLICATION?

1. Applying economics to a company, household or a country helps sweep aside all attempts to dress up
a situation so that it will appear worse or better than it actually is.

*applied economics becomes a powerful tool to reveal the true and complete situation in order
to come up with things to do

EXAMPLE Applied economics can assess the profits of a certain company The result can help the
executives to do some strategies in order to boost its sales

WHAT IS THE IMPORTANCE OF APPLIED ECONOMIC APPLICATION?

II. Applied economics acts as a mechanism to determine what steps can reasonably be taken to improve
current economic situation

*to examine each aspect, one can strengthen areas where performance is weak

EXAMPLE

• Purchase of goods and services

• Usage of raw materials

• Division of labor within entity (e.g. firm, company, agency)

WHAT IS THE IMPORTANCE OF APPLIED ECONOMIC APPLICATION?

III. Applied economics can teach valuable lessons on how to avoid the recurrence of a negative situation,
or at least minimize the impact.

*to review what steps were taken to improve and correct similar situations and continue good
strategies to keep the economy flowing in a correct direction
ECONOMETRICS

WHAT IS ECONOMETRICS?

Econometrics – is the application of statistical and mathematical theories to economics for the purpose
of:

• Testing hypotheses

• Forecasting future trends

The results of econometric are compared and contrasted against real life examples

Theoretical Applied Econometrics