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

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

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

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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? 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?

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

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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?

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

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

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example: income per person compare income across cities in 1995

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

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price quantity demanded demand Negative relationship Here, linear relationship

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Y X Negative relationship but not linear

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price quantity supplied supply positive relationship Here, linear relationship

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Positive relationship but not a linear relationship X Y

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

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

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SlopeSlope quantifies relationship between two variables

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line -- slope is constant nonlinear -- slope changes line -- slope is constant nonlinear -- slope changes

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example 1: Demand for pizza price quantity of pizza demanded demand 2550 $5 $10

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price quantity of pizza demanded demand 2550 $5 $10 x1 = 25, y1 = 10 x2 = 50, y2 = 5 change in x = 25 change in y = -5

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slope < 0 negative relationship

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example 2: nonlinear Y X 7 20 40 30 1015 A B C

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Y X 7 20 40 30 1015 A B C slope from A to B

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Y X 7 20 40 30 1015 A B C slope from B to C slope is flatter

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

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

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