chapter 1 graphing
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Using Graphs to Illustrate RelationshipsBetween Economic Variables
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Appendix
FIGURE 1A-1
Bar Graphs and Pie Charts
Graphs of One Variable
Values for an economic variable are often displayed as a bar graph or as a pie chart.In this case, panel (a) shows market share data for the U.S. automobile industry as a bar graph, where themarket share of each group of firms is represented by the height of its bar.Panel (b) displays the same information as a pie chart, with the market share of each group of firmsrepresented by the size of its slice of the pie.
Review the use of graphsand formulas.
LEARNINGOBJECTIVE
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Appendix
FIGURE 1A-2
Time-Series Graphs
Graphs of One Variable
Both panels present time-series graphs of Ford Motor Companys worldwide sales during each year from2001 to 2008. Panel (a) has a truncated scale on the vertical axis, and panel (b) does not.As a result, the fluctuations in Fords sales appear smaller in panel (b) than in panel (a).
Review the use of graphsand formulas.
LEARNINGOBJECTIVE
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Appendix
FIGURE 1A-3
Plotting Price and Quantity
Points in a Graph
Graphs of Two Variables
The figure shows a two-dimensional grid on which wemeasure the price of pizza alongthe vertical axis (or y-axis) andthe quantity of pizza sold per
week along the horizontal axis (orx-axis).Each point on the grid representsone of the price and quantitycombinations listed in the table.By connecting the points with aline, we can better illustrate therelationship between the twovariables.
Review the use of graphsand formulas.
LEARNINGOBJECTIVE
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Appendix
FIGURE 1A-4
Calculating the Slope
of a Line
Slopes of Lines
Change in value on the vertical axis y RiseSlope
Change in value on the horizontal axis x Run
($12 $14) 20.2
(65 55) 10
Price of pizzaSlope
Quantity of pizza
We can calculate the slopeof a line as the change inthe value of the variable on
the y-axis divided by thechange in the value of thevariable on thex-axis.Because the slope of astraight line is constant, wecan use any two points inthe figure to calculate theslope of the line.For example, when the price
of pizza decreases from $14to $12, the quantity of pizzademanded increases from55 per week to 65 per week.So, the slope of this lineequals2 divided by 10, or0.2.
Graphs of Two Variables
Review the use of graphsand formulas.
LEARNINGOBJECTIVE
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Appendix
FIGURE 1A-6
Graphing the Positive
Relationship between
Income and Consumption
Graphs of Two Variables
Positive and Negative Relationships
In a positive relationship
between two economicvariables, as one variable
increases, the other variable
also increases. This figure
shows the positive relationship
between disposable personal
income and consumption
spending.
As disposable personal income
in the United States hasincreased, so has consumption
spending.
Review the use of graphsand formulas.
LEARNINGOBJECTIVE
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Appendix
FIGURE 1A-7
Determining Cause and Effect
Graphs of Two Variables
Determining Cause and Effect
Using graphs to draw conclusions about cause and
effect can be hazardous. In panel (a), we see that
there are fewer leaves on the trees in a neighborhood
when many homes have fires burning in their fire
places. We cannot draw the conclusion that the fires
cause the leaves to fall because we have an omitted
variablethe season of the year.
In panel (b), we see that more lawn mowers are
used in a neighborhood during times when the
grass grows rapidly and fewer lawn mowers are
used when the grass grows slowly. Concluding that
using lawn mowers causesthe grass to grow faster
would be making the error of reverse causality.
Review the use of graphsand formulas.
LEARNINGOBJECTIVE
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Appendix
Graphs of Two Variables
Are Graphs of Economic Relationships Always Straight Lines?
The graphs of relationships between twoeconomic variables that we have drawn so
far have been straight lines.
The relationship between two variables islinearwhen it can be represented by astraight line.
Few economic relationships are actuallylinear.
Review the use of graphsand formulas.
LEARNINGOBJECTIVE
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Appendix
Graphs of Two Variables
Slopes of Nonlinear Curves
FIGURE 1A-8
The Slope of a Nonlinear Curve
The relationship between the quantity
of iPods produced and the total cost of
production is curved rather than linear.
In panel (a), in moving from pointAto
point B, the quantity producedincreases by 1 million iPods, while the
total cost of production increases by
$50 million.
Farther up the curve, as we move from
point C to point D, the change in
quantity is the same1 million iPods
but the change in the total cost of
production is now much larger: $250
million.Because the change in the yvariable
has increased, while the change in the
xvariable has remained the same, we
know that the slope has increased.
Review the use of graphsand formulas.
LEARNINGOBJECTIVE
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Appendix
Graphs of Two Variables
Slopes of Nonlinear Curves
FIGURE 1A-8 (continued)
The Slope of a Nonlinear Curve
In panel (b), we measure the slope of
the curve at a particular point by the
slope of the tangent line. The slope of
the tangent line at point Bis 75, and
the slope of the tangent line at point Cis 150.
Review the use of graphsand formulas.
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Using Graphs to Show Current
Economic Trends
A Look at Current National Economic IndicatorsPublished by the Federal Reserve Bank of New York
and the Federal Reserve Bank of St. Louis
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