TEXT: Michael Parkin and Bade Robin (2013) Microeconomics: Canada in the Global Environment, Eights Edition with MyEconLab

GRAPHS IN ECONOMICS

B (1, 20) A (4, 5) Coordinate System

The slope of a relationship is the change in the value of the variable measured on the y- axis divided by the change in the value of the variable measured on the x-axis. We use the Greek letter  (capital delta) to represent “change in.” So  y means the change in the value of the variable measured on the y-axis and  x means the change in the value of the variable measured on the x-axis. Slope equals  y/  x.

The Slope of a Straight Line

Variables That Are Unrelated

Equation of a straight-line (linear) relationship Y = a + bX

Position of line: determined by the y- axis (vertical) intercept

Price (in dollars) Quantity $ Nonlinear Curve 40

Slope at a Point The slope of a curved line at a point is equal to the slope of a straight line that is the tangent to that point.

Slope Across an Arc The average slope of a curved line across an arc is equal to the slope of a straight line that joins the endpoints of the arc.

Inverse and Direct Relationships X Y X Y Inverse relationship: When X goes up, Y goes down When X goes down, Y goes up Direct relationship: When X goes up, Y goes up When X goes down, Y goes down

Variables Moving in the Same Direction

Variables Moving in Opposite Directions

Income (in dollars) $14,000 13,000 12,000 11,000 10, (a) Income over time (1) The Importance of Scales Income (in dollars) $18,000 16,000 14,000 12,000 10, (b) Income over time (2)

Variables That Have a Maximum or a Minimum

Maximum Point Maximum Slope = 0 A

Minimum Point Slope = 0 Minimum B

Types of variables There are two types of variables - independent and dependent. Independent variable (the cause variable, controlled variable, manipulated variable, explanatory variable) is a variable that stands alone and is not changed by the other variables the model in question measures. Dependent variable (outcome variable, response variable, measured variable, explained variable) is a variable that depends on other variables in a model