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Appendix: Making & Using Graphs

Appendix: Making & Using Graphs. Why bother? Graphs & Data Graphs & Models Slope. Why bother?. visual relationship between to variables analyze & understand -- information -- ideas. “A picture is worth a thousand words” corny, but true

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Appendix: Making & Using Graphs

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  1. Appendix: Making & Using Graphs • Why bother? • Graphs & Data • Graphs & Models • Slope

  2. Why bother? • visual relationship between to variables • analyze & understand -- information -- ideas

  3. “A picture is worth a thousand words” • corny, but true • a graph conveys info more clearly & quickly than words

  4. Graphs & Data • scatter diagram -- graph x value that corresponds to y value -- relationship between x and y -- do they move in same direction? -- opposite direction? -- varied directions?

  5. example: consumption & income each point = 1 year as income rises, so does consumption

  6. time-series graph -- measures the behavior of a variable over time -- x axis = time -- y axis = variable -- Is variable high or low? rising or falling? stable or volatile?

  7. example: price of coffee price is volatile no long-term trend of rising or falling price ranged between $1-$5 per lb.

  8. cross-section graph -- looks at value of one variable for different groups, at single point in time -- compare outcomes for different groups

  9. example: income per person compare income across cities in 1995

  10. Graphs & Economic Models • how do variables move together? • positive relationship -- variables move in same direction • negative (inverse) relationship -- variables move in opposite direction

  11. price demand quantity demanded Negative relationship Here, linear relationship

  12. Y X Negative relationship but not linear

  13. price supply quantity supplied positive relationship Here, linear relationship

  14. Y X Positive relationship but not a linear relationship

  15. your grade in eco 101 price of tea in China No relationship Your grade is independent of price of tea in China

  16. Car mileage (mpg) speed (mph) Changing relationship Car mileage at first rises, then falls as speed rises

  17. Slope • quantifies relationship between two variables

  18. line -- slope is constant • nonlinear -- slope changes

  19. example 1: Demand for pizza price $10 $5 demand quantity of pizza demanded 25 50

  20. price $10 $5 demand quantity of pizza demanded 25 50 x1 = 25, y1 = 10 x2 = 50, y2 = 5 change in x = 25 change in y = -5

  21. slope < 0 negative relationship

  22. Y A 40 B C 30 20 X 7 10 15 example 2: nonlinear

  23. Y A 40 B C 30 20 X 7 10 15 slope from A to B

  24. Y A 40 B C 30 20 X 7 10 15 slope from B to C slope is flatter

  25. Using graphs • model markets • production & costs • competitive and monopoly firms • explain wage behavior

  26. more practice • Link to graph tutorial at the bottom of the course Web page.

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