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Published in:
2015 | OriginalPaper | Chapter
Prerequisites for Contemporary Econometrics and Systems Modelling
Author : Alexis Lazaridis
Published in: Dynamic Systems in Management Science
Publisher: Palgrave Macmillan UK
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For analytical purposes, it is much more convenient to express any economic relationships in terms of mathematical equations so that we can apply various estimation methods and optimization techniques to derive economic policy in quantitative terms. Below we provide a simple example in terms of a plain consumption function. Here, private consumption in a hypothetical economy can be described as:% MathType!MTEF!2!1!+-% feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn% hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr% 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq-Jc9% vqaqpepm0xbba9pwe9Q8fs0-yqaqpepae9pg0FirpepeKkFr0xfr-x% fr-xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaGaam4qaiabg2% da9iaaikdacaaIWaGaaGimaiabgUcaRiaaicdacaGGUaGaaG4naiaa% iwdadaqadaqaaiaadMfacqGHsislcaWGubaacaGLOaGaayzkaaaaaa!41EB!$$C = 200 + 0.75\left( {Y - T} \right)$$ where C = private consumptionY = income, andT = tax revenue