Economics -Graphs

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Learning to appropriately and efficiently read and interpret graphs is one one of the most important and vital skills for Economics students.

Economics just like any other science is neutral. It analyses cause and effect relationships on matters of an economic nature. It draws attention to the alternatives that are available, the cost of different courses of action and equilibrium situations under stated assumptions and given objectives.

In scientific analysis it is important to distinguish between positive and normative statements. The former are statements of fact and state what was, is or will be. These positive statements can be confirmed or denied by analysis of facts.

Normative statements relate to how things ought to be ordered/addressed. These statements are value statements/judgements and different peoples’s needs and preconceptions depending on their attitudes and beliefs and they may disagree on these normative statements.

For example, these concepts can be related to economics through the following statements:

Positive statement: an increase of 1% in food prices will lead to to an increase in the Consumer Price Index by 0.3%. This reflects changes in the prices of goods and services (this includes changes in prices of imported goods) typically purchased by consumers. A price index is a statistical estimate of the level of prices of some class of goods or services.

Normative statement: An increase in the rate of inflation is preferable than to an increase in the level of unemployment.

The fact that the alternatives being chosen and depending on the objectives being pursued will reflect the value statements/judgements of the individual consumer, the firm, the Government or society at large but does not detract from the inherent neutrality of economic science.

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