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Introduction to Micro-economics Technote. Creating a distribution; calculating a probability. Social science needs to add parts (individuals, firms, etc.) to create a whole. Market demand (private goods) adds horizontally Adding and summarising a group is a basic tool for all research
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Introduction to Micro-economicsTechnote Creating a distribution; calculating a probability
Social science needs to add parts (individuals, firms, etc.) to create a whole • Market demand (private goods) adds horizontally • Adding and summarising a group is a basic tool for all research • We create a distribution of a group attribute (age) by counting members in categories • We can use a small sample to infer features of a population, provided the sample has important properties.
MARKET DEMAND ADDS INDIVIDUAL DEMANDS Market demand curve
Distribution of Class Ages • Compute your age according to the hand out • Plotting the age in groups generates a distribution. • The wider the categories, the higher the count in each category, but the cruder the distribution • The narrower the categories, the sparser the count for a give group size. • Key attributes of any distribution are the mean (average) and variance (spread). • The graph defines a histogram
From distribution to probability • Define the area under the histogram/distribution as 1 • This allows one to answer questions such as • What is the probability that some one is more than 19 in this class? • What is the probability that someone has an age between 16.75 and 17.50 years
Normal Distribution Small variance Large variance