The Methodology of Econometrics – Essay Example

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The paper "The Methodology of Econometrics" is a brilliant example of an essay on macro and microeconomics. Economics can be defined as the study of the ways in which man makes use of scarce resources to meet his needs and wants. The subject explains how goods get produced, exchanged, distributed and consumed. Economics explains how to manage money, the uses and how it gets lost and misused. The economics subject developed as a difficult theory-based course but has developed to be an enjoyable and perplexing subject. Economics has changed the view of being a theory subject (Hugo 13). My view on economics has changed as I first had the impression that it is a complicated subject.

However, exposure to the subject has given me a totally different perspective and understanding that has made me enjoy the subject. The subject, which I thought, was boring has proved to be intellectually stimulating and gives exposure to relevant, practical topics in real life. Economics has proved to be a growing field combining successfully other areas of study like law and politics. I previously viewed Economics as a minor subject, but it has gained recognition as a weighty subject that commands respect, as a successful academic field.

I had reservations in regards to the flexibility of the subject. Economics is a flexible subject designed to develop different skills and competencies. The subject does not train students to be specifically professional economists but gives them the exposure to take up opportunities in other fields like teaching and research. These views have given my reasons for choosing economics as a subject to a new dimension. Economics describes the way in which money, industry, and trade get organized in a society.

The economic tools help understand the changes in an economy and various factors such as employment, inflation, and income. The major tools of economics are economic, mathematical and statistical. Economic tools refer to a given set of conditions used to give probable economic results. The law of demand and supply which insists that demand grows as prices fall and contracts, as prices rise, is an example of an economic tool. As a financial analyst, this will be of vital assistance as it will help monitor finances, inflation, and deflation. Mathematical tools assist economists to solve concrete problems involving numbers.

The tools will be useful when calculating companies’ profit margin, effective product prices to maximize profits. Econometric models and matrix algebra are examples of mathematical tools. As a financial analyst, this will come in handy when analyzing the performance of the company financially (Hugo 13). Unlike mathematics, statistics tools emphasize the processing of a large number of different types of data. An example is in the calculation of a country’ total value of goods and services produced within a specified time.

Statistic tools assist in production to enhance cost monitoring. Regression, correlation, and analysis of probability calculations show examples of statistical tools. To a financial analyst, these tools enhance a better understanding of financial management. In conclusion, a detailed understanding of economics will make a smarter financial analyst. Economics provides a solid knowledge base for understanding a country budgetary system. This helps one to understand world economic events and foreign exchange management.

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