Economic Data

You cannot be successful in economics unless you can use data. It is

through data that we observe the real world. It is in data that we discover

the subject matter of economics, and it is in data that we come to con-

front our economic theories with reality. Only by doing this we can be

sure that the theories make sense. Data handling is therefore a crucial

skill for the economist.

Data are not just numbers. Anything that provides information about

the economic world constitutes data to an economist. Data are the raw

material of economics. Economists use data to test their ideas about how

the world works and to monitor the performance of the economy. This

is a vital role if we are to trust our economic reasoning. We could never

develop confidence in a theory if its predictions were always out of line

with what actually happens. But economists cannot use laboratory ex-

periments to provide evidence in support of their theories. Instead, they

must rely on observations of how people and economic institutions be-

have in the real world. Graphs represent an economic model or theory

which focus on hypothetical relationships or real-world data visually.

Business people use information to get a clear view of many factors

affecting the efficiency, productivity, and profits of their businesses. Pro-

duction managers use statistics data in quality control. Marketing man-

agers do a lot of research, measuring the size of markets, the effectiveness

of various marketing techniques, and the needs and desires of prospective

customers. Financial managers analyze the performance of their invest-

ment portfolios. And risk managers use statistics data to determine risk.

The results of most research efforts can only be made useful by sub-

mitting the findings to statistical analysis. Statistics makes any kind of

numerical data useful and meaningful. Several types of diagrams are

used to display relationships among data (see Fig. 1). A line graph is a

line connecting points. Single line graphs are used to show trends, to

give information about one item. Amounts are given on the vertical axis

and time on the horizontal axis. A bar chart uses either vertical or hori-

zontal bars to compare information. Because of its simplicity, the bar

chart is frequently used in business reports. A pie chart is a circle divided

into slices. The slices are labeled as percentages of the whole circle, or

100 percent. A pie chart provides a vivid picture of relationships, but it is

not good for showing precise data. A table is grid of words and numbers

commonly used to present data when there is a large amount of precise

numerical information to convey.

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Fig.1.

Unit 2