graphs in economics
TRANSCRIPT
Graphs in Economics
Dr. V. Ligorio
Graphs, Variables, and Economic Models
A quantity that can take on more thanone value is called a variable.
The line along which values of the x variable are measured is called the horizontal axis or x-axis. The line along which values of the y-variable aremeasured is called the vertical axis or y-axis. The point where the axes of a two-variable graph meet is the origin.A causal relationship exists between two variables when the value taken by one variable directly influences or determines the value taken by the other variable. In a causal relationship, the determining variable is called the independent variable; the variable it determines is called the dependent variable.
Dr. V. Ligorio
Dr. V. Ligorio
A curve is a line on a graph that depicts a relationship between two variables. It may be either a straight line or a curved line. If the curve is a straight line, the variables have a linear relationship. If the curve is not a straight line, the variables have a nonlinear relationship.
Dr. V. Ligorio
Dr. V. Ligorio
Two variables have a positive relationship when an increase in the value of one variable is associated with an increase in the value of the other variable.It is illustrated by a curve that slopes upward from left to right.
Two variables have a negative relationship when an increase in the value of one variable is associated with a decrease in the value of the other variable.It is illustrated by a curve that slopes downward from left to right.
Dr. V. Ligorio
The horizontal intercept of a curve is he point at which it hits the horizontal axis; it indicates the value of the x variable when the value of the y variable is zero.
The vertical intercept of a curve is the point at which it hits the vertical axis; it shows the value of the y-variable when the value of the x-variable is zero.
The slope of a line or curve is a measure of how steep it is. The slope of a line is measured by “rise over run”— the change in the y-variable between two points on the line divided by thechange in the x-variable between those same two points.
Dr. V. Ligorio
Dr. V. Ligorio
Dr. V. Ligorio
Dr. V. Ligorio
A nonlinear curve is one in which the slope is not the
same between every pair of points
Dr. V. Ligorio
The slope of a Nonlinear Curve
Dr. V. Ligorio
Calculating the slope along a Nonlinear Curve
2 methods :
1)The arc method of calculating the slope
2)The point method of calculating the slope
Dr. V. Ligorio
The arc method
An arc of a curve is some piece or segment of that curve.
To calculate the slope along a nonlinear curve using the arc method, you draw a straight line between the two endpointsof the arc. The slope of that straight line is a measure of the average slope of the curve between those two end-points. Ex.
Dr. V. Ligorio
The point method
Dr. V. Ligorio
Maximum and minimum points
A nonlinear curve may have a maximum point, the highest point along the curve. At the maximum, the slope of the curve changes from positive to negative.
A nonlinear curve may have a minimum point, the lowest point along the curve. At the minimum, the slope of the curve changes from negative to positive.
Dr. V. Ligorio
Calculating the area below or above the curve