# What is Economportics? ae ts the quantitative ap Keation 4 Sta fistial & mathomahias | Modes dla to develop 2eeties or est_exist ty tas 19 Ceonomies KP pereasst es ve frends oh histoeidal hala. oO Hypotheses isan adl WW Sakshes ere On ane} lyst fests an assumption aegerdiug any famemetes) HNC sechsieets gen) - Wortd dala to Stelisteal tials Sten compres the aosults against the them ot theories bewwg. Neste % Mt eedies on technique sudias #¢, pein madels & pull hypotheses hating It can also ‘be used to try to fpeest te lagure _€conar os }poancel tend. The -mettedstisely on stalistical inj enced to quantity Be a Vtoneic- thepsies by 4overn: gree Such as Frequenty bistsibulions , Escbability & cba Soboukions , Stakistical injerche, comelation analysis , ‘Simuitangow eA vations models Arme Sevier metrals w- The puspase is we Statistical meclelling. Zamlysis tn ober to ctansigeth qqualtatve. economic. Contepts into qiieonat ive, information Aro Tahvduals Can use + e.g. Pali 22s Can ude theinfgematitn to crate neo {seal gz nefant polities to SHenubedle the” Eronomy . Sup pose thak pr pean are Qsatingo ned ao increase "see nurieer of jobs! In Sede tD inp, she unemployment ete B boost the est + Econometacsans use om test} i as hypothesis vil be hue or oot by using Stahstical modeds. _ © @ scanned with OKEN Scanner#- Literally interpreted econometiics means ' Economic. Mazsurement”. Br dn be dekined as tne quantilabe analyeis of adual enone Prenomena based on the conurrent development of theory. and Gbsevation, related tp appopedle methods” 4 frifemneet AMI can alo be dedined as tthe sodal Scene in whidh the Tools af Economic this, Mathematics % stabistical injorente cove. oped to the aoelysis uono@ic phenomena” itis Go A istth Ahe_ em pivical determination of tance hws m Bronomic theosy makes Skahernents, ow bypothenis thab anc mostty vabitative in hake + Ke Micro -etonomict States thal , ofrerAbings semaining The ome @ reduction in the beef tomenochiny ie capected to intugane. the quantity demanded of Hat comma ~ Bal, the 4h inset does pot AAC Any oumerd al mewure the Zelabonship between *he-tolo Mat is) 1 does oot tes] ty how much. Me quantity edit) 2 en dom as a@ pesull A ; A Corkain Chan ae in be peices Yne Commodity. = Ih is te job of the economelbicians tp provide. skh numortcat __eabiraho - wy. Etonomle Stabsics is mainly eoocemed att Collecting, poocesss Bod preventing economic Ade In the cho. ‘abi, © L, Exonometeldan’ is perma eget te Cg dalaien SNP, y ___ Leg byroen| aneep ple pacer & Som. dala ecred - ae eae ate jer edmmetee ake. te an @ @ scanned with OKEN Scanner‘ Although mathomabial statistics provides many teols used in the trade “the econo meltitian Aten needy Special ial thethods in view We unique nature oh most economic lata, bomeby ythad. 4 Ape dale anc not generated as ine tottl aka cenboiled Aimant & the modeler is afien ies With ahsewatowel Cmacletings a» oF posed 3d exenerimintal ; b& This hes two Impntent, impli IGhons Jw exnpitical modeling. J fest She modeler is sequined to Fee Fy skills than those neoded feraca) ne periments dala. ¥ Second, the sepucton Br ene collectox & he dela aneyst Aeuives the enadele, to priliasigg tameely Sheweushhy etn he’ malure bc Souths ae On a be = ) menodelogy of. Economettics | #. The Naditonal or classral methocls| zacarch in Ltonomics Bother xcial #. Tradibonal Etonomekic etal proceeel along tte gee = SN dominates emprical behavioral sckences - 1 Statement of. Hypothesis 2 ret ol Tad en re oa tooled ca ee ‘ween 3. atahion a1 The statstHical os economettic moder. 4. oe “the dala Ss. inal whens hah e- pereneteL> ef Ahe- teonemehile- model 6: q- roan + Prediction g. Us model ox contol os poli Gespese sania. ee @ scanned with OKEN Scanner) Musirele the steps, Jefus po sider soesle kno.on Keyoeslen Treeng C consumption» Stahim ent ot Meee ot Hy pothesis Keane Shared). " es damental psy chological Nau 2. 18 Phat Men | Momen arc arspesed , ® a éule Lon av ee to inXkare Where Consumption cy ther Intome Inoeards bal nat as much AS MHe inarae In They inwme” Ws th short, keynes postulatd thal the enarginal to Consume CMPCd, The fale a Chan. can suum Ton or aunt Csey dolla Chan 4g-¥n Yn lorae , 3s Feet than ee lew Tan 1 S Reker of “tre. matremantel model of tonsumption & in tome ie \ke gir eetpoe> postulated a positive is thecke pendent Variable £0 'income is ex lanctoy vavable x on sh pron hekdean OConomic vaeriecblod ane © @ scanned with OKEN Scanner#. TD alld dor the ineaact Wlabonship belideen eloromic. uavables, eonomeriian wed modify ane furdtion Y= p+ fox ra , u, Known a the disturbance ey enor term is a random cstachasic) Variable. The Aisturbene Hem u may well cepreent al these fa ors That arxect Consumption but are not taken inn accotot erm phichely + & Abo eoalion is an exam ain ecormenic mele, more. eceoni cally St Fs an exam Vines, ceggesion models LL this dunthon fy ge» thek Aopenclent variable Y is lneart crek +0 eslfonenhs Variable te ; bul thal selahon sip 2 not exacts Wis sapjet to individual variation - A Obtaining dala: : —_ ox For silainin PA fr uz neat dalr. the dala should be fe degerdent N-(Y) Be independent uriable x 5. _Estimakon af the Etonomettic Medel + mom he basis ofp ae Dect task, #5 tO measur ox esfirrste the LIED. ye Cohsurmphen jinUnon - bb The numesad estimabey ef the. eho oe erpinseal Content to the consomrphion syncten ‘ The sfotctal tect of sasion onchsio te te etn “e) used 40 obioln the: est @ scanned with OKEN ScannerHy pathesis 7 Tesh x: hee Ree model isa Rearonably imo i we ae develop suitable oditesia ind) oud. ape aiimales obtained are in acces one the exgecrtione 4 dine Aheon thal is being. eared b —, to Milton Predman, Who 33 an Etonomist, a them oy eis thatis net Ved gable by ial 10 em) ts ek om Se may net be admissible as a pon ef caank en . aan x ie pected Mec to be posibve bul tedthan A: In ote exer, te ee I APE about 07425 then Selyre we_accegl the finding. as won Broation 4 eypenban Consumptop Thi we mut Uhquire “VIhAher fim ig sapcentty elds ie Cohvinee ur thal this is oot a Chana occurance oxbuler dala ured. & In othe, words 042 Stabs cally tev then Ay Wp TP Bs , tren IE ar Keyner's Theory « - Sudy Se at at teonorne thearles onthe bars 4 Sample, on a branch atabshal th aw «> hy potinens Testing. (smatistical inl ey ae @ scanned with OKEN Scannera q we ase MPC OFZ, Ibis mUbplier bewmer about_M => 3:SF J that is, an incrarse [decrease 8 dole investment esi!) everhually Veal to mow than othrethe|d invuere ercleondere in Income « LA syantinatve exracte af ap < Prowler vieluable ipienelin iY yee pane 052° ee me one Gan pred ct the: course of intome, oi int se ee ep piney, ge . Use dine wodel - Cooke) es Folie, Re poses m wd wher the Govt. belies foal tonsumer Thue of about al esp the one ee wnem) TC male arits cervrent love} abad 4-2) cco, 6) rrantte) af Income ul) Qoeke, eee of compte abitne! — HY dhe. ony Besults, seem s+easonable, Sar es, how That = = 394-543 404215 ( Edt a 006) 534, ximmataly « \ Seca 12524 bo+, aivnan MPC Au ar a 37D by 4 pea the Got. Gn ® @ scanned with OKEN Scanner*) om the. Intercept tha Reapenion Model. at Inter tina 50m) model isnt always a “es sed a» it wks ¢. 4 F rorercep tapes labeied tre Constant) is the wget owen Value of Y When al( K=O x X SomeFrey fee 2, 0. the ieee 1S RH shee che 7 Thay eatataae wea al at jral Value - Theat @ scanned with OKEN Scannerake This 1s especialy important ro crosidervaben Au coed Cow SeT iced ven Interaction Awe * oe 4 Say ee >, 7s & continvows variable contoured aicits euan - Arisa durmeny} coded grain and “the model contains an intomchion teem fos Xx *D A-The B value the intercept isthe mean value af 1 On _ tee aig The endan value of haanyaiees ous TsU the ie plus he cre ppaent ig Xe he Hoo 1 eye dhe \nvercey| in 6 Linear Sequesion Exarp ple: 5 Senile Unver Regeason ™ odel. Fe Pot FOO Where, a Y= The preckered Value toythe Leaponse vitiable 0 = The Mean Value aby porn spatobi, =? rh a = The ove Ohana Fn Hy nse Vaerlacble der _ A a one ont ona Inve ls § XS The value fyte grea ctor: variable. An Some anes, TE mak® Senseo ‘nterpael the Malis fpr in tina Simple bre wasn bul not al fe e4) Intercept Makes sense reibiagnel a uppoe we'd THE fo ARE a sitple- neat Anatension eraleh veva, hows shded oy a yooh cine variable 2 Crary sane _ = AS ne vrepase vauable 6 @ scanned with OKEN ScannerWe il) Consider Aila ig. 50 shedlents ina certain College Coarse & Rt the fglowing, tegen 309 70a} Exam score = 6S + Q-6F C hours) L The Value qov Ahe- ‘ntereet Mam 19 this model is 65-4. This means the av bee Adore NS GS-4 pohem the number af hours Sudied ts \, This takes & ie tet Since ifs clausible- a student D sudy BR hows in preparation ser an tam - 2) Iter cepl. dows Hel Make Sense TO Inhew-peel ‘- x: ‘we oe ove! te pb. a cr decent 0D Proce! we (ney de Se Contac lacs NR & ie aul) ? aed, tne SO Teil ton Yyinei mod * RK ms Relght = 22-3 0.28 Cyownds? 4 wee vai the Wench tears In this model is 22:3 This walls een ‘ho a haat aa penser 19 22:3 inches bvhon ther 00% Xs eawh L ‘This oe net mm, sense Ho ‘nterpret since fs pot possible ova gundds > T= Hodever, Seen, wear dB he. intercept teym in the made} : io orden to mt the- engeal YO e predichions « ' ~ — The. jn! L ast past Wve any omean) Fntesprelehove eet. j meng bmn @ scanned with OKEN Scanner’ \nbecept: Does oot Make Conse 1D Wher Peet 2 *. pase we'd § to bt a mul Bple- an Bon rake} ne aS CQ number af ao prea ve ies Zam P coe mapa Vebakn L, we Collect the \Oo housed tn ‘er cérterine oN A BE the spytonenng vigil Pex Bhanieta: hh Csquene jyitene + aha 4S CH beclicom x The Nalue. te ‘Diewceptt hese 9 thls or is As veo My houwre- This usd We mean the av Brod $4 BF 244 when the toe re, of ae na vowe are bot ©) This doosh mal conse a thks prel Since. 14's oat pessidle for o bower xo pie bed-syoms: S07 the-¥ = “ont i We “aR Va keerpoekabors is mode! a ® @ scanned with OKEN ScannerChapter: 4 The nature af Regerion Analy sis K- Histatial orien af the Vee “Repponion” ws LT ar Inhvduted by Francis Galton: Galton tound thal ‘thee coar a tendenuy tal) childven & eb ao ar ene to xy Shot Fan ren bon af parents. af ) feguton Versus Gusahn x Alte 500 analysis als wit the a lence a ene Variab\e de) other varieblery iy Aces net necowanly sett awakon - In other corsels Kechll & teert "A stasticak EolaKnstip , hperever sho! & Suqgesbve, @ NOVEL ested ish crush Gonnechon : Wea a aushhdo must come YOM outsile stabyNes, — _U) Bemalthy i Somme, ORE Or Orne! eld Cuarpie, there ts op Stalishical Season to amu. thal on Woy Yet. L carp yiod ow d shal considec Hons - tet the eolabonship annst be Svesed, -rain}all by Sar oop yiald. p in ied @nnot degaty del) suet 1 Veriable se taial @ scanned with OKEN Scanner~Reppession versus Corelaten. Yaniable A _ ~ Va &- Closely related +o bul conceptual! rauch di 1 exweern scores on Stati mathemacs otam , beroees high schoo| led & coll der & so ow: & & sly in to ls fn 10M analysis —Y we are net ds ods. Instead! coe try Fd Utimale ox u bol she avenge vole of one wevtable on tre basis dd the 4 values of Sthaw varicbies- —Thys, se may eOant fo Know whether we an bot Pe ov Sure on a Yalshes exam by shai a student's Sore oP Prcths xa: = cosrelation have some only. Hotere digtgrences trot ee Variables dre a ; Fs have fixed values ci fo ak A deeito of E @ scanned with OKEN Scanner_ Ip ceerelatin analysis, on the other \nand, cae treal an cao) Aes ae mobil. there is no distinthon Sarr A srckert We Nantony Variables —aAher all, the comelaton batdeer swses on maths & savehics exaey iedne Same a that between scene on sbees & maths Ram * b Moyeover, both variahle> ave avenue *o be random . Most of the conelation teseohe fe be an the auumphons 4 randonres_ 4 variable; worst of thee reosiony Hy to be coerced $3 concibonal upon the susie pho “aah The sacl tee dopentesl Variable ts stachastic but ‘whe explanation varias les ave ee oe non-stochastic’ ) ereino\ & Notation’. a The Terms depercent Variable Se ox planet Variable are described Mansel . Dependant variable ey Valrecble a 4 biog} visriable ned t variable - se — Predictor covanale eon veuiable @ scanned with OKEN Scanner‘on more A-explanetory, a k we aw stidving the F ariabley an tn the C10 “fe ie all, © HUNe , Sen Shine forge example, it 3s Kuadn = soulltple_£e geen conse \ Howeve,, if woe. are the. dependence, ch ame weriable- ory as explanato le Ji € consump expendi Ihave © Rea\! Ineome — such a nchdy is now oe wo Navable , meee ssien analysts k. The Fea darchm isa sipenym ier tne Neen Stochastic « «As ned, a random a stochashe Variable is a Variable Heat Gn 60 pany set ah. values, positive os nepplive, vsttnagiven peo babilt we. The letter 'Y weil) donde the dent variable tne x's C%,X2,- BEX), use!) donete tre excplank variables m_BOuq the Kih explanatovy Veviebl = the Sxbseaipt Text twill dente Mh oy Lith cbsenabens ox wl) dente the Mb Cot t th) obsewatiow> 30 Mende the total number af absenations BON , Le wceet) asill dense Ane tof. @ Valuer in ce Sample - ON the Abseavahion Subs coi pt 1 osi\ be @ scanned with OKEN ScannerTTT @) The Nature Q Sourcoy ab Pata fer Econowic. Analyas! # The succew pierce $y ulbmately depend an Ne svn grate dad. by YES. oe enna tra we bone time dis aasivg, the. — sur co> & Nimitations oh toe date tral ene may encounter in ih anal sis : Sala: a oon es af date ray Re available, ees onalysis ») Time “Benen 2) Cross: ~Seokion 8) Ff ed rtombination’ rie ya) * - Time Gesen Dafa’. he A dime sores 3s a oe af obsewations en the values tal ao Veriable fe at a : — such dala mew collected at Lime Intervaln, such ar dail ee aa Oe Meee) oH Aa ess 2 ae Gye ma census a lable both a ar wWel\ar anavally, on ah Seay @ scanned with OKEN ScannerAime cones Ada are ured heavily tm econoroeteic Valuer stedie te ABD ae eet — economelticians 60 Fime Gures tale auumes al the underty' a euied om staho nex — ea ug, "A Tene, Sesien’s “staboomy its moan Bevetian do ost systemabio tty over time: Oss Section bole. ae Cress Secon Adla on ane er more vavieb\er ak the same point in ime, Suk an he_census of yopuletin cinelucked bY tre Cense> Bureau ESTA OULU toys: x: aise as a fine: series data cece theie ode sperial prebleres ( becaune a Tewwe), cross 3s Jaw) conce=ned sith eotimadra, ar poor rm) value ef the a Kvariehle om the bans die kono ae. ees Valuer 44 the Srglenaton Variables - to | 160 [180 [200 | 228 [a40 [aco, Tse [102/10 | 120 [135] 3F | 150 93 | rot |rrs | x36 | SF [48 | S2 4s | HO | tae | Jao [yo | ISS) VAs 1o3 | Nb 130 | 4k | ysr|leS | FB foZ | WS | 135 | JAS [ist [7S | 182 eS. | jos | Ho | )40 [184 | 8S” us| — [|— |— |2|- |I9 Hot [648 | 450 [68S [ros fae f120 tov | n3 [ros [rae ] 549 qT | 33 ee to a total opelsticn 6 fem’ Kies na a geeky Toceme Oe) (5) Kaoeory Fin ctllars - Lo eome-paresis Choma, 80 TO 42a) Ktheig @ scanned with OKEN Scannerx. General pictnc-that one x" ts Aha the varjabi lin A weekly ranzamption expenditue aithin eat intome bratket L 00 the ovelege mee, consumptian ougend tune Wercarer Bs income \OULADSED ~ K. Ip all we have to mean valoes dor the Jo sub+o) watons of Y. WX Cal\ Shese mean veluer Condifional expeered values ; a> tert 9d on the aver Valuer valicble & en bolieathy oe dente hemes ECY (KD, Whith +e tead ay the oles Valen ALK #- Nk we add the coeeklY consumption expend tees al\ 60 temilies in population, Ae Avid by Go, we ait toe number 4 Ia 20 p23? [60> tomth Is cond Heval mean ; ot vole & eek consumption sapent ECTS: This wn condiBonal inthe sense thatin qeivg ak this AUMbo& toe have enegeulal Hea income fovets of vartiaues pre. A we ask she question” What is the. ected week consumpbon endibayt. tafe _whste. momttly Income ts say $140% poe Woe. arson #10) ¢ col rides msn) 7 " . Ls nw, tne Krowledge Frtome level may enable us to better preaict ee ay Cin sumption snir ae. clo vot have the ey ». Geamebicetty then, population 4 ROM tame 75 Sirnply the lot a} condiFonal mean af Ane. aagertent terteble fp the Re valtes AL the Variablor * L mae & PITS the lave connecting the orcas Gf Me- Sub-gogulations oY Conresparding to we awn veelues! of @ scanned with OKEN ScannerConayenphied SAPD 150, lot lo) Tre _conrept of Gpulation Ragesion Runction CPRED x. this Chea that aah conditenal meen ECy/*') Ba pe abs, where a Xi 1s a qven Value of % . So, Siyo balicaby, E CIM =P) where ACV) denotes some Junthion af the exphn varieble % Above aatishon is Knndoles conditional ex pactabort pgncten coer 6 ov eopaaion veneer CPRE) ° By Srabey thak the enpecttd value ef Hte distethublon y apven Xi , is prmenaty aaled to Xi @ @ scanned with OKEN Scanner*. What ke doe The function F.Cx1) avamed “This Vs an ienpotest quettion beaure Io ral shubions we donot ave the entire populahon available Jas examination & The GuntHanah dow a FRE is Here dgie an empirical quesBon- 2+ Brerample, an economist wight consider ‘hak consumption onpenditnre. VS Neveaaly related to In tomes _ Ls Therese, oy a hast vocokivg, ty pothesis , coe my axume hak PRE ECYIXD 5 a dinen, ftir of, EU = By Afri phere B KBr ake can kown bul Reed (oramelors Knew ar bows sen aperaae kes an Intercept Be tape eyo IP reqwesion analysss cw tofeneat Im esfimads ; PRP ke. enpation jis Oth Yhe valulr of ihe enkmins Br 62 on ta_-bans 4a Phsenchns ¥ KX. x f K (>) The Meartud. 4 Tene Ginga? @® Lanenrsty to the: vasiablen: H Nahera) meaning ct} Uneeh{ 2s Fhe she condibional oxecocion Ay 1s & ner junction af. 76. 2-4" Geomernctly the DON CMICiIN ATS awe is a Strath live: Jn ans int Kon, & pension sunution ECYIX)=B,4 BRP 3s nf 4 Winter yaction bepacwe “vertable_ arpenes AH Q POOL OL index af 2- te) @ scanned with OKEN ScannerHA moclelts Wneay when ach testy is eithey a constant dx the proctuct of cerameter Sa prices Variable « mr 1D stahstes, a pation (az funtion) i= Nees. when This nem, af fara noel. ) Lneasih So Ravarsetert'. ¥ Es AR-The. Send io af ineasity is thal condivona ecteBon AY E.CLDS) Ts a Vineay Funcbhon atthe farometes ) Bs 5 it may Ab may ne bein Vineas in the Y= Brit PAV parks pur? Variable. %. by 0 Ihs Snheypectalon 5 se EQUA) = By pRO 40 45 bared on Pelunomicl Reqy- Je a Wintas, Cin the paramere “e ‘t steppe rode} . — : @ 4 cubic @ scanned with OKEN Scanner%. Stergose x > value 8 -Thereten, E(YIK=3> - Pit ape whith Is ebviouily Vneay in Be ince L MN Ake models Shown in 8 eres que thuy Vinees aeggenion rrodely thats ,mo dels Nineas in the Parameters #- wow, Wrsider the model BCY|[Ki) = Bt bra: Now seggse 3, Jhon we eblain ECE = Bit? Bet which 16 pon «nee tn She faromelins Bo. #- Gomthe Jud in Sons ai lineenit ' Bnei inthe Geromefers 46 wipes in Awe}opment oA FOr eon £ Now Or , She too" Finer” megreton ods\) alosatys pemain Breer tn the Grametes - A) Stochastic Specs ‘ealion of PAF” 4: From me tablr cotekly Rey intome expendi 530 is cleay thal > Ke Iinume inurearey , Consampton Op pendiine ofan individual ern ly he Yoo. Ly But what abel he mosumpton expenditine of ar individual a Br Sr aelation to its Qixed) erel al Incems? a Ye sable iio abit thal irtivdeal farly : tensurseton aa enti choos nok Decemraaihy Freware cts He Income ove} vwcdtnes 2-4. we Chere thal” corresponding ro the income level of $100 ~Inoxe- 45 ‘one Jory pohose consumption expenditun f.$6sieuthan the Consuenphion ender A so fomlied eohase money — intone only 80" , @ scanned with OKEN ScannerBut HEe-Fhat ms averpge Sons OM ex vend Thune 4 ie oni a waged in (oe. Bey then Abe avers rom onditore af eo iv oa 2 weekly income) 4D OF Je Abs) What aan toe Say obeitl the kelatinnsvip beNbeen ar Indi Waal forts Coneumppon expendi hwe ha aven ef lovcemel, Ls Vor tHe Snwme evel Xi, 2 Individual gamilye consumption. open 7s clustered around tre wo Lohetn al daniier ck thal x\ that's, around ite ie Thugderr, Oe. Or tay tne Auiakion aban individual Y> od Vhs Gapected value plu Y= ENR + Mi tobe the dawation wh i227 wnobsenvese fandom vatakte rekg. ABVE orn ve dues Ky echovaathy ULiskrndn os the srechastic. disturbance as ese teary > So to Soveopet abou eaustions we @n =] Anal tre ay Mee of ary indhuah amily. aiven tS income level car be exprened ake Suro ¢h wo Sooke! 3 ECY\A) —eshich fs man Consumption Ane a aN Jahier ott sare ‘le 45! This romeo en) BS Konoaes thee System a leleaminishe. Cornganent 2 ) Ae , vehide 1s the a Or 000) tematic cor ponent eae 3s ayunedd toll unees in X¥, above equation ine er a! Vig Erbe) rat = =f ths jer © @ scanned with OKEN Scanner