ECON 201 Lecture Notes - Lecture 4: Panel Data, Hypothesis, Weighted Arithmetic Mean
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Economists use economic theories and models to explain behaviour and predict policy outcomes. Ex: a model of the housing market helps predict the impact of a change in the mortgage rate on home prices. Theory: mortgage rates determine the nance cost of buying a house, therefore: Hypothesize that changes in the mortgage rates cause changes in the house prices. Construct a model to test the hypothesis and gather data. Observe the data: increasing house prices and failing mortgage interest rates simultaneously. I infer: house prices are inversely related to mortgage rates. Predictions: does the model help with predictions. Ph = ph o - b x mr. Ph o = constant (mr up by 1 %) Economic variables: measures that can take on di erent values. Longitudinal data (data collected over a longer period of time with more people) Are means of representing data more simply. Express values of variables relative to a base value.