Chapter 1 Appendix
Graphics in Economics
• 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 diagramplots 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 relationshipor a direct relationship.
o A relationship shown by a straight line is called a linear re.ationship
• Variables that move in opposite directions
o A relationship between variables that move in opposite directions is called a negative
relationshipor 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. The Slope of a Relationship
• The slopeof a relationship is the change in the value of the variable measured on the -axis
divided by the change in the value of the variable measured on the x-axis.
• We use the Greek letter Δ (delta) to represent “change in”.
• So the slope of the relationship is Δy/ Δx.
• The slope of a straight line is the same regardless of where on a s