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Nature and Methods of Economics 2: Graphing for Macroeconomics Fall 2013
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Visual Representation Economic information is usually accompanied by a graph, so very nearly any economic concept in this class has a graphing aspect Economic analysis is dependent upon models, simplified descriptions of real situations – so most graphs depict the relationships between two variables (holding everything else constant)
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Let’s review some basic graphing concepts…
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Two-Variable Graphs Movement along the x- and y-axis depicts the causal relationship between the two variables
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Pair and Share What is meant by independent variable ? What is meant by dependent variable ? Define horizontal intercept and vertical intercept.
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General Graphing Conventions The independent variable is on the horizontal axis; the dependent variable is on the vertical axis A line on a graph (made up of independent points) is called a curve, regardless of whether it is curved or straight
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Positive and Negative Relationships When two variables have a positive relationship, an increase in one results in an increase in the other When two variables have a negative relationship, an increase in one results in a decrease in the other
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Slope Slope demonstrates how sensitive the dependent variable is to changes in the independent variable. Slope can be positive, negative, constant or variable (increasing or decreasing).
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Pair and Share Draw and label a linear relationship and a nonlinear relationship. Describe the slope of each line. Draw and label a positive relationship and negative relationship. Describe the slope of each line.
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Horizontal and Vertical Curves In a horizontal curve, the y variable never changes – so the slope is 0 In a vertical curve, the x variable never changes – so the slope is infinity In both cases, there is no causal relationship
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Increasing/Decreasing Slope, Minimums and Maximums
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Other economic data graphs 1. Time-series graph
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Other economic data graphs 2. Scatter diagram
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Other economic data graphs 3. Pie chart
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Other economic data graphs 4. Bar graph
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