Economic theory makes statements or hypotheses that are mostly qualitative
in nature. For example, microeconomic theory states that, other
things remaining the same, a reduction in the price of a commodity is expected
to increase the quantity demanded of that commodity. Thus, economic
theory postulates a negative or inverse relationship between the price
and quantity demanded of a commodity. But the theory itself does not provide
any numerical measure of the relationship between the two; that is, it
does not tell by how much the quantity will go up or down as a result of a
certain change in the price of the commodity. It is the job of the econometrician
to provide such numerical estimates. Stated differently, econometrics
gives empirical content to most economic theory