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Appendix Using Graphs: A Review

Graphs Used in Economic Graphs Used in Economic Analysis Analysis

Display large quantity of data quickly Display large quantity of data quickly Facilitate data interpretation and analysis Facilitate data interpretation and analysis Important statistical relationships more Important statistical relationships more apparent than from written descriptions or apparent than from written descriptions or long lists of numbers long lists of numbers

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Two-Variable Diagrams Two-Variable Diagrams

Variable = something measured by a Variable = something measured by a number number
Examples: price and quantity Examples: price and quantity

View two variables together to see if they View two variables together to see if they exhibit a relationship. exhibit a relationship.

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Gas Demanded at Various Prices Gas Demanded at Various Prices

TABLE 1: Quantities of Natural TABLE 1: Quantities of Natural

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Hypothetical Demand Hypothetical Demand Curve for Gas Curve for Gas
D 6 5 6 5 a b

FIGURE 1: FIGURE 1:

Price

3 2 1 0

Price

4 3 2 1 P a b D Q 80 100 120 140

20

40

60

Q 80 100 120 140

20

40

60

Quantity (a)

Quantity (b)

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The Definition and The Definition and Measurement of Slope Measurement of Slope
Slope = ratio of vertical change to Slope = ratio of vertical change to horizontal change horizontal change
Rise/run Rise/run Measure of steepness of the line Measure of steepness of the line

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The Definition and The Definition and Measurement of Slope Measurement of Slope
The slope of a straight line The slope of a straight line
Negative slope = one variable rises while the Negative slope = one variable rises while the other variable falls other variable falls
The two variables move in opposite directions. The two variables move in opposite directions.

Positive slope = two variables rise and fall Positive slope = two variables rise and fall together together
The two variables move in the same direction. The two variables move in the same direction.

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FIGURE 2a: FIGURE 2a:

Y

Negative Slope Negative Slope

Negative slope X
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FIGURE 2b: FIGURE 2b:

Y

Positive Slope Positive Slope

Positive slope X
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The Definition and The Definition and Measurement of Slope Measurement of Slope
Zero slope = the variable on the horizontal axis can be Zero slope = the variable on the horizontal axis can be any value while the variable on the vertical axis is fixed any value while the variable on the vertical axis is fixed
Horizontal line Horizontal line

Infinite slope = the variable on the vertical axis can be Infinite slope = the variable on the vertical axis can be any value while the variable on the horizontal axis is any value while the variable on the horizontal axis is fixed fixed
Vertical line Vertical line

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FIGURE 2c: FIGURE 2c:

Y

Zero Slope Zero Slope

Zero slope X
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FIGURE 2d: FIGURE 2d:

Y

Infinite Slope Infinite Slope

Infinite slope X
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The Definition and The Definition and Measurement of Slope Measurement of Slope
The slope of a straight line The slope of a straight line
Slope is constant along a straight line. Slope is constant along a straight line. Slope can be measured between any two Slope can be measured between any two points on one axis and the corresponding two points on one axis and the corresponding two points on the other axis. points on the other axis.

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How to Measure Slope How to Measure Slope

Y Y 3 Slope = 10 11 9 8 C A 1 Slope = 10 B 8 C

FIGURE 3: FIGURE 3:

3 (a)

13

3 (b)

13

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The Definition and The Definition and Measurement of Slope Measurement of Slope
The slope of a curved line The slope of a curved line
Slope changes from point to point on a curved Slope changes from point to point on a curved line. line.
Curved line bowed toward the origin has a negative Curved line bowed toward the origin has a negative slope. slope.
Variables change in opposite directions. Variables change in opposite directions.

Curved line bowed away from the origin has a Curved line bowed away from the origin has a positive slope. positive slope.
Variables change in the same direction. Variables change in the same direction.

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Negative Slope in Curved Lines Negative Slope in Curved Lines

Y

FIGURE 4a: FIGURE 4a:

Negative slope

X
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Positive Slope in Curved Lines Positive Slope in Curved Lines

Y

FIGURE 4b: FIGURE 4b:

Positive slope

X
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The Definition and The Definition and Measurement of Slope Measurement of Slope
The slope of a curved line The slope of a curved line
A curved can have both a positive and A curved can have both a positive and negative slope depending on where on the negative slope depending on where on the curve is measured. curve is measured. The slope at a point on a curved-line is The slope at a point on a curved-line is measured by a line tangent to that point. measured by a line tangent to that point.

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Behavior of Slope Behavior of Slope in Curved Lines in Curved Lines

Y Negative slope Positive slope 0 X 0 Y Positive slope Negative slope X

FIGURE 4c,d: FIGURE 4c,d:

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How to Measure Slope How to Measure Slope at a Point on a Curve at a Point on a Curve
Y 8 7 6 5 4 3 2 1 0 B 1 2 3 A t 4 5 6 7 8 9 10 t C T M G E r r D R F

FIGURE 5: FIGURE 5:

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Rays Through the Origin and Rays Through the Origin and 45-degree Lines 45-degree Lines
Y-intercept = point at which a line Y-intercept = point at which a line touches the y axis touches the y axis Ray through the origin = straight line Ray through the origin = straight line graph with a y-intercept of zero graph with a y-intercept of zero

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Rays through the Origin Rays through the Origin

Y Slope = + 2 Slope = + 1 B A K E 0 1 2 D 3 4 5 X Slope = + 1 2 5 4 3 C 2 1

FIGURE 6: FIGURE 6:

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Squeezing 3 Dimensions Squeezing 3 Dimensions into 2: Contour Maps into 2: Contour Maps
Some problems involve more than two Some problems involve more than two variables variables Economic contour map called a Economic contour map called a production indifference map production indifference map
Shows how variable Z changes as we change Shows how variable Z changes as we change either X or Y either X or Y

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An Economic Contour Map An Economic Contour Map

Y 80 70 60 50 40 30 20 10 0 10 20 30 40 A B Z = 40 Z = 30 Z = 20 Z = 10 50 60 70 80 X

FIGURE 8: FIGURE 8:

Yards of Cloth per Day

Labor Hours per Day

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