Economics is the study of various factors that affect both nations and individuals. To avoid the bland use of economic theory in their explanations, economists mix in mathematics and statistics in their studies. This compilation of research techniques leads to econometrics, with a distinct link between statistics and econometrics as economists explain the likelihood that something will occur. Econometrics also makes heavy use of case models, which are often the base for specific studies on a given topic. Researchers gather copious amounts of information and use econometrics and statistics to explain any relationships between hypotheses.
All major economic studies require the use of variables and one or more hypotheses; in some cases, a literature review testing other studies may be possible. Many people with upper-level degrees — primarily at the doctorate level, though some with master’s degrees as well — teach the use of statistics for research and studies. In short, economic researchers look to define relationships between variables that may drive the economy. Statistics and econometrics are linked as researchers need information on the strength between relationships and the correlations between gathered data. Common statistical measurements include standard deviation, ANOVA, and regression, among others.
Not all studies conducted with the use of statistics and econometrics use the same techniques. For example, businesses may need information on the likelihood that an event will occur in a specific time period. The use of an economics consulting firm may help a company determine equilibrium points for products, marginal costs, marginal revenue, and other economic measurements. Statistics can help a company determine the probability of these events occurring. Again, these studies cannot be complete without the use of econometrics and statistics being involved.
The most common way for either type of study to start — whether for a national study or an individual company — is with a simple question or the discovery of a problem. An economic model may then be put in place to help answer the question or complete the study. In short, these models can test economic parameters, review elasticities, predict economic outcomes, or test a hypothesis based on assumptions initially made during the early stages of the study. Statistics and econometrics are necessary to properly define how to use these models and solve economic problems. Other analyses will test the economic consequences of actions, as in what happens when a company makes a poor decision.