2.7 MODELS + DATA

• Empirical evidence is data collected through observation or experimentation. In economics, empirical research is needed to understand the actual impact of variables.
• Ideally, a controlled experiment would vary one factor while holding all others constant. However, this is not always possible, so data from real-world situations must be collected instead.
• Scatter diagrams plot two variables to observe their relationship
• Scatter Diagram:

  • Minimises the dispersion of points aroundthe line
• Econometrics:

  • statistics used to measure relationships ineconomic data