Appendix 1: Applying Graphs to Economics

Appendix 1 Applying Graphs to Economics©1999 South-Western College Publishing Key Concepts Summary Practice QuizInternet Exercises1What is aDirect Relationship between two variables?When one increases, the other increases and vice versa* Return to previous slide while in slide show2What is the Slope of a line?The ratio of change in the variable on the vertical axis (the rise or fall) to change in the variable on the horizontal axis (the run). 3Slope = rise/run = vertical axis/horizontal axis = Y/X4Expenditure for Personal Computerat Different Annual IncomesPersonal ExpenditureAnnual Income$1,000$2,000$3,000$4,000$10,000$20,000$30,000$40,0005432110203040ABCDY=1X=10YX6What is an Inverse Relationship between two variables?When one increases, the other decreases and vice versa7Quantity of Compact Discs Consumers Purchased at Different PricesPrice per compact discQuantity of compact discs$20$15$1025,000,00050,000,00075,000,000$5100,000,00082015105255075100ABCDY=5X=25Negative Sloping CurveXY9What is an Independent Relationship between two variables?When one variable changes, the other variable remains unchanged10Expenditure for Toothpasteat Different Annual IncomesPersonal ExpenditureAnnual Income$10$20$30$40$10,000$20,000$30,000$40,000114030201010203040ABCDY=0X=10XY12Can Slope vary along a curve?Yes, the slope of a curve can vary along the curve13432110203040AY=2X=30XY142015105255075100AY=X=50-10XY15How can I tell the difference between a movement along a curve and a shift in the curve?When price changes, there is movement along a curve. When something other than price changes, the whole curve shifts.16What can change other than price?When income increases, for example, the whole demand curve shifts upward172015105255075100Annual Income $60,000Annual Income $30,000XY1820151055101520CDPositive Sloping CurveXY19Key Concepts©1999 South-Western College Publishing20What is a Direct Relationship between two variables?What is the Slope of a line?What is an Inverse Relationship between two variables?What is an Independent Relationship between two variables?Can Slope vary along a curve?What can change other than price?21Summary©1999 South-Western College Publishing22 Graphs provide a means to clearly show economic relationships in two-dimensional space. Economic analysis is often concerned with two variables confined to the upper right-hand (northeast) quadrant of the coordinate number system.23432110203040ABCDY=1X=10YXA direct relationship242015105255075100ABCDY=5X=25An inverse relationshipXY254030201010203040ABCDY=0X=10XYAn independent relationship26432110203040AY=2X=30XYPositive slope of an upward-sloping curve272015105255075100AY=X=50-10XYNegative slope of an downward-sloping curve28 A shift in a curve occurs only when the ceteris paribus assumption is relaxed and a third variable not on either axis of the graph is allowed to change29 Appendix Quiz©1999 South-Western College Publishing301. Straight line CD in Exhibit A-7 on the next page shows thata. increasing the value of X will increase the value of Y.b. decreasing the value of X will decrease the value of Y.c. there is a direct relationship between X and Y.d. all of the above.©1999 South-Western College PublishingD. As the value of X increases, the value of Y increases, and vice versa; this is called a direct relationship. 3120151055101520DEXHIBIT A-7XYC322. In Exhibit A-7, the slope of straight line CD isa. 3.b. 1.c. -1.d. 1/2.D. The slope of a line is measured by the rise over the run, or a change in vertical divided by a change in the horizontal. For example, as Y increases from 5 units to 15, X increases from 0 to 20. The slope is 10 divided by 20.333. In Exhibit A-7, the slope of straight line CD isa. positive.b. zero.c. negative.d. variable.A. When both X and Y move in the same direction, it is said that they are directly related to one another.344. Straight line AB in Exhibit A-8 shows thata. increasing the value of X reduces the value of Y.b. decreasing the value of X increases the value of Y.c. there is an inverse relationship between X and Y.d. all of the above.D. When the value of X decreases, the value of Y increases and vice versa; this shows a direct relationship between X and Y. 3520151055101520ABEXHIBIT A-8XY365. As shown in Exhibit A-8, the slope of straight line ABa. decreases with increases in X.b. increases with increases in X.c. increases with decreases in X.d. remains constant with changes in X.D. The slope of a straight line stays the same between the two points on the line. 376. In Exhibit A-8, the slope of straight line AB isa. 3.b. 1.c. -1.d. -5.C. There is a one to one inverse ratio between a change in X and a change in Y. For example, as Y decreases from 20 units to 0, X increases from 0 to 20. The slope is -20 divided by 20.387. A shift is a curve represents a change ina. the variable on the horizontal axis.b. the variable on the vertical axis.c. a third variable that is not on either axis.d. any variable that is relevant to the relationship being graphed.C. A shift occurs when something changes other than the price. 398. A change in a third variable not on either axis of a graph is illustrated with aa. horizontal or vertical line.b. movement along a curve.c. shift of a curve.d. point of intersection.C. When price changes the movement is always along a stationary curve. When something changes other than price, the whole curve shifts. 40Internet ExercisesClick on the picture of the book, choose updates by chapter for the latest internet exercises©1999 South-Western College Publishing41END42