LECTURE 2
Analytical and other tools used in
economics
Algebraic Tools/Economic equation
EQUATION:
Y=a+bX
Where: y= Dependent variable; a = Constant/Intercept;
b = Gradient/slope; X = Independent variable.
Consumption = 100 + 0.99 Income
Identify the following variables:
Dependent & Independent variables?
Intercept? What does it represent?
Slope? What does it represent?
Interpretations? NB!
Statistical Tools
• Table
• Graph
• Measures of central location
– Mean
– Mode
– Median
Graphical tools
• What is a graph?
• Are they useful?
Can you draw a graph?
P 1 2 3 4 5 6 7 8 9 10
Q 20 18 16 14 12 10 8 6 4 2
Slopes
• Positive
• Negative
• Interpretation?
Types of graphs
• Line Graph
• Histogram
• Pie Chart
Flow diagrams
Economics
Problem of scarcity
Unlimited needs Limited resources
Choices
Computer applications
• Excel
• Eviews
Table
Prime
2003/01/31 17
2003/02/28 17
2003/03/31 17
2003/04/30 17
2003/05/31 17
2003/06/30 15.5
2003/07/31 15.5
2003/08/31 14.5
2003/09/30 13.5
2003/10/31 12
2003/11/30 12
2003/12/31 11.5
2004/01/31 11.5
2004/02/29 11.5
Graph
Mean
• Average
• Sum of all the values / Number of values
• 202.5 / 14 = 14.46%
• Interpretation?
Mode
• Value that occurred most frequently.
• 17 %
• Interpretation?
Median
• The midpoint of the values.
• Order data from the smallest to the largest –
middle value is the median.
• 15
• Interpretation?
CHART TYPE
Histogram
Pie Chart
