Economic Theory Essay Example for Free

Economic Theory Essay dickens of the primary tasks in the world of Economics are prediction and evaluation. This assignment illustrates, at a vestigial level, how mouldings, techniques and manners constructed or borrowed from Economic Theory or other Sciences respectively are employ to help chance upon these tasks. To do so, we consider a standard theoretical model of consumer choices in an economy in which the wholly activity is the ex replace of goods.Due to the above-mentioned we git say that the most powerful technique use to predict the consequences of policies or coming(prenominal) trends is modeling. A model is an abstraction in extended to convey the essence of most particular aspect of the real world. Most economic models assume the existence of adequate teaching, yet information is a costly and scarce resource. Good models predict wellhead enough to increase our understanding of accredited situations, even though they may not predict them perfectly and t here may be link up situations in which the same models do not predict as well as expected. Last moreover not least there are models that constructed without utilise any numerical data these are found entirely on economic theory.We shall begin by looking at some of the ways in which forecasting techniques can help us to predict future trends. Most business and economic decisions repose upon forecasts of future conditions. Methods of forecasting may be more or less categorized as follows* Opinion polling* Mechanical extrapolations* barometrical techniques* Statistical and econometric methodsFinally, forecasting techniques vary widely in their accuracy and sophistication. The most accurate technique is to be preferred, subject to the availability of data, expertise and finance and to the nature of theforecast required.OPINION POLLINGThe assumption here is that by asking people who are likely to be directly involved, such as consumers or the gross sales force, attitudes and ass urances which affect economic decisions can be assessed and predicted in advance. Opinion polling is a subjective method of forecasting made up largely of a weighted or unweighted averaging of expectations and attitudes.This general idea of development informed and deliberated polling opinion has had a relatively length history successful experimentation beginning roughly during the 1970s in the U.S.A. In statistics polling is about probability sampling. A good polllocates people who jolly represent the population were interested inasks them fair, comprehensible and useful questionscalculates results fairly, without reaching beyond the dataandis describe so people can understand where it does and does not apply.The importance of opinion polling and the way it can be done is shown in the infra FigureOpinion polling is a very powerful technique employ to predict future trends. Based upon probability sampling it can give people legion(predicate) answers upon many problems in the s ociety. Depending on the size of the sample, the results are relatively accurate, scientific representation of the entire publics considered opinion on perplexing issues.Today there are a lot of companies which provide a wide course of consultancy gos and offer top quality look for based solutions to their clients problems. They also provide full service market interrogation process, from defining research objectives through analysis and presentation of data. To achieve their goals they use research methodologies, advanced statistical analysis and strategic relevant and decision reports. Their credibility and reputation is reflected in the event that their publicly released findings are regularly quoted by the media (press, radio and television). Additionally, these companies are leading agencies in Socio-Political public opinion polls and Political Candidate Evaluation research.Another aspect of opinion polling is exit-poll. For example scientists use exit-poll method to predi ct who is going to win in elections. The exit-poll method is not 100% accurate, but the error in the midst of the real results and the ones from exit-poll is very-very small. Asking a small sample of population inside a society it can predict whether the conservative of socialist party is going to be elected.Finally, opinion polling is also used by companies to know which ware of theirs is more consumed by people. Asking a small sample of people using questionnaires (more often) they can realize which product of theirs is more consumed by people, which product are less consumed and tries to find meaning of improvement for others.MECHANICAL EXTRAPOLATIONSThis is probably the most frequently adopted method of forecasting. It involves the basic assumption that ultimo patterns of economic behavior continues to the consequence that past behavior can be used to predict the future. It has the loss leader of also being relatively cheap in that the company is likely to posses most of t he relevant historical information. Last but not least, the mechanistic methods of forecasting rely on future conditions being an extent of past ones.Also, this method might consist of taking a time series of historical sales figures, and fitting a trend line to it by eye as shown in the figure belowThis can then be used to read off sales predictions for the required future dates.To build up this line between the dependent and independent variables of data, as shown in the above figure, the ordinary least-squares (OLS) technique uses a mathematical formula to illustrate this line. However, the technique also produces a measure of the explanatory power of the alliance on the basis of the relationships observed in the original data. A mathematical formula for producing this line isWhere a and b in this equation have been estimated using regression analysis (a set of statistical techniques used to quantify the relationship between two or more variables).BAROMETRIC TECHNIQUESIn addi tion with mechanical extrapolations, barometric techniques assume that present happenings can give an indication of future events. Also, this technique is based on the observation that there are lagged relationships between many economic time series.Moreover, to give an indication of future events, there are three types of indicators as far as economic activity. Leading indicators are those which tend to herald future changes in the course of business activity. Coincident indicators move in step with the rhythm examples of these might include aggregate levels of sales, employment and industrial production. Finally, there are lagging indicators, which trail substructure the level of economic activity.Although it is possible to isolate various leading indicators the direction of movements in each does not presage movements in economic activity with complete accuracy. The reason is that the lead-time between their behavior and the ensuing change in economic activity is not likely to be constant.Nowadays, many companies who want to see which of their product is more consumed by people, they make a statistical figure in order to calculate this. utilize barometric techniques they can find which product of theirs is more consumed by people, which is not going too well and try to give improvements for others. So, they can indicate from present happenings, how a product can be in the future.STATISTICAL AND ECONOMETRIC METHODSScience is given as truth ascertained by observation, experiment, and induction. The purpose of learning known as statistics is to provide the means for measuring the amount of subjectivity that goes into the scientists conclusions and thus to separate cognition from opinion. Hence, statistical and econometric methods, similar to those used in time series regression can be used to analyze the economic relationships between variables.Many of the firms forecasting problems can be solved with a single equation econometric model. Laws of probabili ty are applied to this model in order to circumscribe what chances are for the various possible outcomes of the experiment. The first step in the construction of such a model is to specify the hypotheses, which purport to explain the relationships between the variables. Hypothesis testing is the process of inferring from a sample (a army of some elements of a population) whether or not to accept a certain narration about the population. The statement itself is called the hypothesis. When the model is constructed it gives the businessman the opportunity of experimenting to test the predicted results of various strategies.There is a vast variety of companies offer a full-service marketresearch which means the capability to successfully undertake any research get wind from the conceptual stage through the design, data collection, tabulation, analysis, interpretation of findings, recommendations, and presentation. The projects they undertake span a broad take off of industries, ty pes of studies, experimental designs and analytical statistical techniques. They are skilled in the wide variety of quantitative and qualitative techniques, providing their clients with a seamless connection between all phases of the research program. Their full range of custom research for Consumer and Business to Business research includes the following* Tracking studies* Product testing* Taste testing* Home-use tests* denote research* Strategic research* Product Positioning research* Concept tests* Customer satisfaction tests* and so forth