chapter 1 graphing

8/11/2019 Chapter 1 Graphing

1/21

Using Graphs to Illustrate RelationshipsBetween Economic Variables


2/21

Appendix

FIGURE 1A-1

Bar Graphs and Pie Charts

Graphs of One Variable

Values for an economic variable are often displayed as a bar graph or as a pie chart.In this case, panel (a) shows market share data for the U.S. automobile industry as a bar graph, where themarket share of each group of firms is represented by the height of its bar.Panel (b) displays the same information as a pie chart, with the market share of each group of firmsrepresented by the size of its slice of the pie.

Review the use of graphsand formulas.

LEARNINGOBJECTIVE


3/21

Appendix

FIGURE 1A-2

Time-Series Graphs

Graphs of One Variable

Both panels present time-series graphs of Ford Motor Companys worldwide sales during each year from2001 to 2008. Panel (a) has a truncated scale on the vertical axis, and panel (b) does not.As a result, the fluctuations in Fords sales appear smaller in panel (b) than in panel (a).


LEARNINGOBJECTIVE


4/21

Appendix

FIGURE 1A-3

Plotting Price and Quantity

Points in a Graph

Graphs of Two Variables

The figure shows a two-dimensional grid on which wemeasure the price of pizza alongthe vertical axis (or y-axis) andthe quantity of pizza sold per

week along the horizontal axis (orx-axis).Each point on the grid representsone of the price and quantitycombinations listed in the table.By connecting the points with aline, we can better illustrate therelationship between the twovariables.


LEARNINGOBJECTIVE


5/21

Appendix

FIGURE 1A-4

Calculating the Slope

of a Line

Slopes of Lines

Change in value on the vertical axis y RiseSlope

Change in value on the horizontal axis x Run

($12 $14) 20.2

(65 55) 10

Price of pizzaSlope

Quantity of pizza

We can calculate the slopeof a line as the change inthe value of the variable on

the y-axis divided by thechange in the value of thevariable on thex-axis.Because the slope of astraight line is constant, wecan use any two points inthe figure to calculate theslope of the line.For example, when the price

of pizza decreases from $14to $12, the quantity of pizzademanded increases from55 per week to 65 per week.So, the slope of this lineequals2 divided by 10, or0.2.



LEARNINGOBJECTIVE


6/21

Appendix

FIGURE 1A-6

Graphing the Positive

Relationship between

Income and Consumption


Positive and Negative Relationships

In a positive relationship

between two economicvariables, as one variable

increases, the other variable

also increases. This figure

shows the positive relationship

between disposable personal

income and consumption

spending.

As disposable personal income

in the United States hasincreased, so has consumption

spending.


LEARNINGOBJECTIVE


7/21

Appendix

FIGURE 1A-7

Determining Cause and Effect


Determining Cause and Effect

Using graphs to draw conclusions about cause and

effect can be hazardous. In panel (a), we see that

there are fewer leaves on the trees in a neighborhood

when many homes have fires burning in their fire

places. We cannot draw the conclusion that the fires

cause the leaves to fall because we have an omitted

variablethe season of the year.

In panel (b), we see that more lawn mowers are

used in a neighborhood during times when the

grass grows rapidly and fewer lawn mowers are

used when the grass grows slowly. Concluding that

using lawn mowers causesthe grass to grow faster

would be making the error of reverse causality.


LEARNINGOBJECTIVE


8/21

Appendix


Are Graphs of Economic Relationships Always Straight Lines?

The graphs of relationships between twoeconomic variables that we have drawn so

far have been straight lines.

The relationship between two variables islinearwhen it can be represented by astraight line.

Few economic relationships are actuallylinear.


LEARNINGOBJECTIVE


9/21

Appendix


Slopes of Nonlinear Curves

FIGURE 1A-8

The Slope of a Nonlinear Curve

The relationship between the quantity

of iPods produced and the total cost of

production is curved rather than linear.

In panel (a), in moving from pointAto

point B, the quantity producedincreases by 1 million iPods, while the

total cost of production increases by

$50 million.

Farther up the curve, as we move from

point C to point D, the change in

quantity is the same1 million iPods

but the change in the total cost of

production is now much larger: $250

million.Because the change in the yvariable

has increased, while the change in the

xvariable has remained the same, we

know that the slope has increased.


LEARNINGOBJECTIVE


10/21

Appendix


Slopes of Nonlinear Curves

FIGURE 1A-8 (continued)

The Slope of a Nonlinear Curve

In panel (b), we measure the slope of

the curve at a particular point by the

slope of the tangent line. The slope of

the tangent line at point Bis 75, and

the slope of the tangent line at point Cis 150.


LEARNINGOBJECTIVE


11/21

Using Graphs to Show Current

Economic Trends

A Look at Current National Economic IndicatorsPublished by the Federal Reserve Bank of New York

and the Federal Reserve Bank of St. Louis


12/21


13/21


14/21


15/21


16/21


17/21


18/21


19/21


20/21


21/21

chapter 1 graphing

Documents