Economic analysis is the study of a given industry in detail with all the aspects associated with it. It evaluates the impact of various events on a particular industry in terms of profit, consumer behaviour and national income. It can also be used to forecast trends and predict the future. This is a process that can be performed either retrospectively (by studying the past) or prospectively (by collecting data in real situations).
The analytical tools used for economic studies are complex and can require weeks to months to complete, depending on the complexity of the project, the availability of resources, and the availability of existing data. These projects often blend economic theory, environmental science, and policy analysis. They are often data-driven, and statistics play a key role in validating the conclusions drawn.
One of the most challenging tasks in economic analysis is identifying and obtaining appropriate input data. For example, a cost for hospitalizing a patient with tularemia may include numerous component costs such as physician and nursing time, laboratory tests, medications, and emergency room or hospital room occupancy. Often these numbers are difficult to obtain and sometimes inconsistent among sources.
Another challenge in performing an economic analysis is the ceteris paribus assumption, which requires holding all other factors in a situation constant to determine its effect on decisions or outcomes. For example, to determine whether a tuition increase has an effect on college enrollment, it is necessary to hold student incomes and the market value of a college degree constant. This can be difficult, as the number of factors influencing the decision to attend college can vary.
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