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INTERCEPT, CONSUMPTION LINE: The intercept of the consumption line indicates autonomous consumption, consumption that does not depend on the level of income or production. This can be thought of as the baseline level of consumption that would be undertaken if income falls to zero. Autonomous consumption is affected by the consumption expenditures determinants, which cause a change in the intercept and a shift of the consumption line. The value of the intercept of the saving line is the negative of the value of the intercept of the saving line.

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EMPIRICAL:

Based on or relating to the collection or analysis of real world data. The term empirical is commonly used as a modifier to provide contrast with theoretical. Whereas theoretical refers to abstract representations, empirical indicates actual real world observations.
Empirical observation is critical to the scientific method. Once a hypothesis is implied by a theory, empirical observation is key to the verification process. Does a hypothesis stand up to the scrutiny of empirical verification? Does it explain real world phenomena?

For example, Professor Grumpinkston might hypothesize that lower interest rates will entice consumers to purchase new cars and boost sales in the automobile industry. Being an experienced economist, the professor can easily come up with a very convincing story that explains why this will happen. Lower interest rates make it easier and less expensive to get loans. Most cars are paid for through loans. Consumers borrow to buy cars. Car sales rise. Makes sense, does it not? It must be true, right?

This, however, is merely theoretical speculation at this point. It is only a hypothesis until evaluated against empirical data. The empirical alternative is to collect interest rate and automobile sales data for the past several decades, and then apply standard statistical analysis. If the professor does this right, he should be able to generate empirical evidence indicating whether or not a relation actually exists between interest rates and automobile sales.

This is no longer theoretical speculation. It is empirical observation. He has the numbers. He can see with his own pair of nearsighted eyes that lower interest rates are accompanied by greater auto sales, or not. He can pass this information along to others who can then confirm the results with their own nearsighted eyes.

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EMPIRICAL, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2020. [Accessed: October 31, 2020].


Check Out These Related Terms...

     | data | phenomenon | verification | hypothesis | theory |


Or For A Little Background...

     | scientific method | economic analysis | principle | positive economics | science | economic science |


And For Further Study...

     | abstraction | comparative statics | dismal science | economic thinking | explicit cost | seven economic rules | fallacies | physical science | social science |


Related Websites (Will Open in New Window)...

     | American Economic Association | American Association for the Advancement of Science |


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