# Key Concepts

Variables: measures that can take on different sizes.

Data: recorded values of variables.

Time series data: a set of measurements made sequentially at different points in time.

High (low) frequency data series have short (long) intervals between observations.

Cross-section data: values for different variables recorded at a point in time.

Longitudinal data follow the same units of observation through time.

Index number: value for a variable, or an average of a set of variables, expressed relative to a given base value, as seen in Equation 2.2:

$$\text{Value of index} = \displaystyle\frac{\text{Absolute value in year}\,t} {\text{Absolute value in base year}} \times \:100.$$

$$\textbf{Percentage change}= \displaystyle\frac{\text{change in values}} {\text{original value}} \times \:100.$$

Consumer price index: the average price level for consumer goods and services.

Inflation rate: the annual percentage increase in the consumer price index.

Deflation rate: the annual percentage decrease in the consumer price index.

Real price index: a nominal price index divided by the consumer price index, scaled by 100.

Nominal price index: the current dollar price of a good or service.

Nominal earnings: earnings measured in current dollars.

Real earnings: earnings measure in constant dollars to adjust for changes in the general price level.

Scatter diagram plots pairs of values simultaneously observed for two variables.

Econometrics is the science of examining and quantifying relationships between economic variables.

Regression line represents the average relationship between two variables in a scatter diagram.

Positive economics studies objective or scientific explanations of how the economy functions.

Normative economics offers recommendations that incorporate value judgments.

Economic equity is concerned with the distribution of well-being among members of the economy.