Theory and Percentage Change Essay

716 Words3 Pages
Q.R.1 It is often said that a good theory is one that can be refuted by an empirical, data-oriented study. Explain why a theory that cannot be evaluated empirically is not a good theory.

Theory, whether in economics or sciences, helps ones predict and succeed in explaining on what they intend to explain relies on convincing assumptions. However, accuracy and validity of theories are important as the more accuracy in the theory, the more success in whatever business or science. Hence, all theories should be tested whether they are practical in the reality. If they are not, we should develop and modify them so that ones can make good predictions with current circumstance and match reality, otherwise these theories will be useless.
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Calculate the real price of butter in 1980 dollars. Has the real price increased/decreased/stayed the same from 1980 to 2000?

| |1980 |1985 |1990 |1995 |2000 |
|CPI |100 |130.58 |158.56 |184.95 |208.98 |
|Retail price of butter |$1.88 |$2.12 |$1.99 |$1.61 |$2.52 |
|(salted, grade AA, per lb.) | | | | | |
|Real price |$1.88 |$1.62 |$1.26 |$0.87 |$1.21 |
| | | | | | |

Real price of butter in year X
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