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Chapter 1

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Graphics in Economics

Graphing Data

• Making a graph:

o The horizontal line is the x-axis.

o The vertical line is the y-axis.

o The intersection of the x-axis and the y-axis is the origin.

• A scatter diagram plots the value of one variable against the value of another variable.

Graphs Used in Economic Models

• Variables that move in the same direction

o A relationship between two variables that move in the same direction is called a

positive relationship or a direct relationship.

o A relationship shown by a straight line is called a linear relationship.

• Variables that move in opposite directions

o A relationship between variables that move in opposite directions is called a negative

relationship or an inverse relationship.

• Variables that have a maximum or a minimum

o A relationship that has a maximum slopes upward as it rises to its maximum point, is flat

at its maximum, and then slopes downward.

o A relationship that has a minimum slopes downward as it falls to its minimum point, is

flat at its minimum, and then slopes upward.

• Variables that are unrelated

o Variables that are unrelated are shown on a graph as either a horizontal line or a vertical

line.

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