1. Appendix 1 Applying Graphs to Economics
Key Concepts
Summary
Practice Quiz
Internet Exercises
©2002South-Western College Publishing

2. What is a direct relationship between two variables?
When one increases, the other increases and vice versa

3. What is the slope of a line?
The ratio of change in the variable on the vertical axis (the rise or fall) to change in the variable on the horizontal axis (the run).

4. vertical axis/horizontal axis = Y/X
Slope = rise/run =
vertical axis/horizontal axis = Y/X

5. Expenditure for Personal Computer at Different Annual Incomes
Personal Expenditure
Annual Income
$1,000
$2,000
$3,000
$4,000
$10,000
$20,000
$30,000
$40,000

6. Y D 4 C 3 B
Y=1 2 A
X=10 1 X 10 20 30 40

7. What is an inverse relationship between two variables?
When one increases, the other decreases and vice versa

8. Quantity of Compact Discs Consumers Purchased at Different Prices
Price per compact disc
Quantity of compact discs
$20
$15
$10
25,000,000
50,000,000
75,000,000 $5
100,000,000

9. Y
Negative Sloping Curve A 20 B 15
Y=5 C 10 D
X=25 5 X 25 50 75
100

10. What is an independent relationship between two variables?
When one variable changes, the other variable is unchanged

11. Expenditure for Toothpaste at Different Annual Incomes
Personal Expenditure
Annual Income
$10
$20
$30
$40
$10,000
$20,000
$30,000
$40,000

12. Y 40 30 A B C D 20
X=10 10
Y=0 X 10 20 30 40

13. Can slope vary along a curve?
Yes, the slope of a curve can vary along the curve

14. Y 4 3 A 2
Y=2 1 X
X=30 10 20 30 40

15. Y 20 15 A Y= 10
-10 5 X
X=50 25 50 75
100

16. How can I tell the difference between a movement along a curve and a shift in the curve?
When price changes, there is movement along a curve. When something other than price changes, the whole curve shifts

17. What is an example of a change other than price?
When income increases the whole demand curve shifts upward

18. Y 20
Annual Income $60,000 15 10
Annual Income $30,000 5 X 25 50 75
100

19. Positive Sloping CurveY D 20 15 C 10 5 X 5 10 15 20

20. ©2002South-Western College Publishing
Key Concepts
©2002South-Western College Publishing

21. What is a direct relationship between two variables?
What is the slope of a line?
What is an inverse relationship between two variables?
What is an independent relationship between two variables?
Can slope vary along a curve?
What can change other than price?

22. ©2002South-Western College Publishing
Summary
©2002South-Western College Publishing

23. Graphs provide a means to clearly show economic relationships in two-dimensional space. Economic analysis is often concerned with two variables confined to the upper right-hand (northeast) quadrant of the coordinate number system.

24. Y
A direct relationship D 4 C 3 B
Y=1 2 A
X=10 1 X 10 20 30 40

25. An inverse relationshipY
An inverse relationship A 20 B 15
Y=5 C 10 D
X=25 5 X 25 50 75
100

26. An independent relationshipY
An independent relationship 40 30 A B C D 20
X=10 10
Y=0 X 10 20 30 40

27. Positive slope of an upward-sloping curveY
Positive slope of an upward-sloping curve 4 3 A 2
Y=2 1 X
X=30 10 20 30 40

28. Negative slope of an downward-sloping curveY
Negative slope of an downward-sloping curve 20 15 A Y= 10
-10 5 X
X=50 25 50 75
100

29. A shift in a curve occurs only when the ceteris paribus assumption is relaxed and a third variable not on either axis of the graph is allowed to change

30. END