Key Tools for Economic Analysis: Just like in every other field of study, economists frequently rely on simple and efficient tools such as tablets, charts, and graphs to present information rather than lengthy written pages. These visual aids and concise ideas offer a clearer and more accessible way for readers to grasp statistical data, especially for those with limited time or difficulty interpreting detailed texts. Visual data representation is crucial in economic analysis and has become a standard approach in modern writing. This article will delve into various types of diagrams and visual aids commonly used in economic analysis, known as tools for economic analysis. To grasp the fundamentals of economic analysis, it’s essential to read this article attentively.
1. Tables, charts and graphs
Tables, charts and graphs are some of the most used tools in economic analysis. In fact, just as lawyers are known for speaking legal maxims and Doctors for medical terms, that is how Economists are known for using Tables, charts and graphs.
Often times, they serve as a shorthand for the presentation of facts. Instead of writing volumes of written words, the same information is presented in a form of tables, graphs and diagrams which can catch the eye quickly. Well, it is also important to note that Tables, charts and graphs are not the same at all. As we continue, I will try to give a better explanation to these terms and how they are different from each other.
Tables: In economics, a table is simply an orderly arrangement of information in boxes, showing the relation between variables. Tables are very essential in economics because they help to make the field of study even more beautiful and attractive to students.
Basically, below are some of the Key Tools for Economic Analysis:
1. Tables reveals information that is being conveyed to reader at a fast rate. This is probably impossible if the same information is hand written.
2. They help in reading, writing and interpretation of information to readers.
3. Representing information in a tabular format help to economize writing materials and spaces.
4. It can be used for future forecast on the same study.
Charts: Unlike a table, charts are simply graphical presentation of data. Charts can either be called (charts, diagrams and graphs). This three words (charts, diagrams and graphs) are often used interchangeably to mean the same thing but they are obviously not the same thing.
First and foremost, A graph is a pictorial presentation of the relationship between variables. Many types of graphs are employed in economics depending on the nature of the data involved and the purpose for which the graph are intended.
Graphs, often called charts or diagrams, come in various types, including bar graphs, pie graphs, and pictographs. We might use terms like bar chart and pie diagram interchangeably, but they actually have distinct characteristics.
A bar chart consists of a series of rectangles whose heights represent the assessed values. The bars’ heights are scaled to show relative measurements, while their widths can vary but must remain uniform and non-overlapping.
In contrast, a pictograph uses images resembling the objects being compared, allowing for a visual comparison of totals. For instance, a farmer might use rice bags to depict annual rice production quantities over different years.
It’s important to distinguish between a pictograph and a histogram. A histogram is a graphical representation of frequency distribution, typically comprising rectangles based on the horizontal axis, or x-axis, with their centers aligned with the class marks (mid-points) of each interval.
To learn more about tables and charts, I suggest watching the video below.
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Basic Tools in Economic Analysis
2. Measures of central tendency
A measure of central tendency to an average figure or value. This average is the one that is more centrally placed or typical among a series of figures or values. There are five measures of central tendency and they include the following:
- The arithmetic mean or arithmetic average
- The mode
- The Median
- The geometric mean and,
- The harmonic mean
Together, they are referred to as the measures of central tendency. As we continue, i will discuss just three out of the five of them.
Arithmetic mean: Arithmetic mean (otherwise called mean) is the average of a series of figures or values. It is obtained by dividing the sum of these figures by the total number of the figures or values.
For example, if there are 10 graduates in a class and they obtained the following test = 60, 50, 45, 30, 80, 85, 65, 50, 55, 40
The mean of the above will then be:
60, 50, 45, 30, 80, 85, 65, 50, 55, 40 / 10 = 56
So the arithmetic mean is simply 56.
Median: Median is an average which is the middle, value when figures are arranged in order of magnitude. So if for instance we have values like:
60, 40, 45, 30, 80, 65, 50, 55
By rearranging the marks in order of magnitude, we get:
30, 40, 45, 50, 55, 60, 65, 80, 85
Now, counting from the left, we see that the 5th position gives the median value. Therefore, the median is 55.
Mode: Mode is probably the simplest in the measures of central tendency. It simply means the value that appear most in a series of value. So take for instance, if you have the following values:
1, 2, 5, 8, 5, 6, 3, 5, 8, 2
The mode amongst all the values is “5”. And the reason is simply because 5 appears more than every other value in that particular series of values.
So far, i have taken enough time to talk on the different tools of economic analysis and I believe this article has really done justice to the topic. I therefore enjoin to read this work again and again, if you want to understand the tools of economic analysis properly. Meanwhile, if you have any question or contribution, kindly drop it in the comment section below this article.