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GRAPHS IN ECONOMICS

This appendix covers the use of graphs in economics, including how to create and interpret scatter diagrams, time-series graphs, and cross-section graphs. It explains the relationships between variables, such as positive and negative correlations, as well as cases where variables have maximum or minimum values or are unrelated. The document aims to equip readers with the skills to graph and analyze economic data effectively.

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murodzodaabdullah
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5 views

GRAPHS IN ECONOMICS

This appendix covers the use of graphs in economics, including how to create and interpret scatter diagrams, time-series graphs, and cross-section graphs. It explains the relationships between variables, such as positive and negative correlations, as well as cases where variables have maximum or minimum values or are unrelated. The document aims to equip readers with the skills to graph and analyze economic data effectively.

Uploaded by

murodzodaabdullah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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CHAPTER 1

APPENDIX
GRAPHS IN ECONOMICS
Objectives
 After studying this appendix, you will be able to:
 Make and interpret a scatter diagram
 Identify linear and nonlinear relationships and relationships that have a
maximum and a minimum
 Define and calculate the slope of a line
 Graph relationships among more than two variables
Graphing Data

• A graph reveals a relationship.


• A graph represents a quantity as a
distance on a line.
• A two-variable graph uses two
perpendicular scale lines.
• The two scale lines are perpendicular
to each other are called axes.
• The vertical line is the y-axis.
• The horizontal line is the x-axis.
• Each axis has a zero point, which is
shared by the two axes and called the
origin.
Graphing Data

 There are three types of graphs used by Economists


to illustrate relationships between variables.
 Time-series graphs
 Cross-section graphs
 Scatter diagrams
Graphing Data

 Time-Series Graphs
 A time-series graph measures time (for example,
months or years) along the x-axis and the economic
indicator representing variable or variables in which
we are interested along the y-axis.
 In short time series graph shows how a variable
changes over time.
Graphing Data
Graphing Data

 Cross-Section Graphs
 A cross-section graph shows the values of a
variable for different groups in a population at a
point in time.
Graphing Data
Graphing Data

 Scatter Diagrams
 A scatter diagram is a graph that plots the value of
one variable against the value of another variable
for a number of different values of each variable.
 A scatter diagram plots the value of one variable
on the x-axis and the value of another variable on
the y-axis.
 Such a graph reveals whether a relationship exists
between two variables and describes their
relationship.
 The three scatter diagrams on the next slide show
examples of variables.
Graphing Data
Graphing Data
Graphing Data

 Correlation
A scatter diagram that
 shows a clear relationship between two variables,
such tells us that the two variables have a high
correlation.
 When a high correlation is present, we can predict
the value of one variable from the value of the other
variable.
Graphs Used in Economic
Models
 Graphs are used in economic models to show the
relationship between variables.
 The patterns to look for in graphs are the four cases
in which:
 Variables move in the same direction
 Variables move in opposite directions
 Variables have a maximum or a minimum
 Variables are unrelated
Graphs Used in Economic
Models
 Variables That Move in the Same Direction
 A relationship between two variables that move in
the same direction is called a positive relationship
or a direct relationship.
 A line that slopes upward shows that economic
variables are positively related or economic
indicators has a positive relationship.
 If the relationship is illustrated by a straight line is it
is called a linear relationship.
 The three graphs on the next slide show positive
relationships.
Graphs Used in Economic
Models
Graphs Used in Economic
Models
 Variables That Move in Opposite Directions
 If the relationship between two variables that move
in opposite directions there is a negative
relationship or an inverse relationship exists
between those variables.
 A negative relationship is illustrated by a line that
slopes downward.
 The three graphs on the next slide show negative
relationships.
Graphs Used in Economic
Models
Graphs Used in Economic
Models
 Variables That Have a Maximum or a Minimum
 The two graphs on the next slide show relationships
that have a maximum and a minimum.
 Relationships
 are positive over part of their range and negative over
the following part.
 Or
 are negative over part of their range and positive over
the following part.
Graphs Used in Economic
Models
Graphs Used in Economic
Models
 Variables That are Unrelated
 Sometimes two variables are unrelated so there is
no relationship exist between them.
 There are 2 examples of variables that are unrelated
shown in the next slide.
Graphs Used in Economic
Models

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