Graphs generally depict a relationship among two economic variables, such as between income and household spending, or between the interest rate and capital.

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Presentation transcript:

Graphs generally depict a relationship among two economic variables, such as between income and household spending, or between the interest rate and capital goods production.

Median Income of Full- Time Workers in the U.S. (1996 dollars) Source: Economic Report of the President

If, ceteris paribus, X increases as Y increases (and vice-versa), then we have a direct relationship between X and Y

If, ceteris paribus, X increases as Y decreases (and vice-versa), then we have a negative relationship between X and Y

ß Let C=f(Y) ß C is household spending (the dependent variable) ß Y is income (the independent variable).

C Y C = f(Y)    RISE RUN Slope = RISE/RUN =  /  = 50/100 =.50