Chapter 01: Appendix: Limits, Alternatives, and Choices

01Limits, Alternatives, and ChoicesAppendixMcGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Construction of a GraphLO7TableGraphIncomeConsumptionPoint$ 0100200300400$ 50 100 150 200 250abcdeConsumption (C)Income (Y) $100 200 300 400abcde$400 300 200 100 01App-*Direct and Inverse RelationshipsLO7 Direct relationshipBoth variables move up or down together1App-*Direct and Inverse Relationships Inverse relationshipLO7Variables move opposite of each other1App-*Slope of a LineLO7Consumption (C)Income (Y) $100 200 300 400$400 300 200 100 0 Positive slope of a straight lineSlope =Vertical ChangeHorizontal Change+50+100= 0.5==1250100VerticalChangeHorizontal Change1App-*Slope of a LineLO7Ticket PriceAttendance (thousands)$500404308201210160201App-*Slope of a Line Negative slope of a straight lineLO7Slope =Vertical ChangeHorizontal Change=-10+4=12-25040302010 4 8 12 16 20-104Horizontal ChangeVerticalChangeTicket Price $Attendance=-2.51App-*LO7Slope of a LineSlopes and measurement unitsSlopes and marginal analysisInfinite and zero slopes1App-*LO7Price of BananasConsumptionWatch PurchasesDivorce RateSlope = InfiniteSlope = ZeroSlope of a Line1App-*LO7Equation of a Linear Relationshipy = a + bxy is the dependent variablea is the vertical interceptb is the slope of the linex is the independent variable1App-*Equation of a LineLO7Consumption (C)Income (Y) $100 200 300 400$400 300 200 100 0Y = 50 + .5C1App-*Equation of a LineP = 50 – 2.5QLO75040302010 4 8 12 16 20Ticket PriceAttendance1App-*LO7Slope of a Nonlinear CurveSlope always changesMust use a line tangent to the curve to find the slope at that point1App-*Slope of a Nonlinear CurveLO7201510 5 05 10 15 20 Use tangent lines to find the slope1App-*