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Working with Graphs Graphs are used to demonstrate economic theories.
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Theories and Models Theories are developed to explain observed phenomena in terms of a set of basic rules and assumptions. While most economic models are abstractions from reality, they provide aid in understanding economic behavior.
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A Good Theory Consists of A set of Variables; A set of Assumptions; At least one Hypothesis; and The ability to make Predictions.
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Positive and Negative Slopes X 0 Y 0 X Y Negative SlopePositive Slope Y = f (X) Y: Endogenous (Dependent) Variable X: Exogenous (Independent) Variable
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