ECN 201

PRINCIPLES OF
MICROECONOMICS
LECTURE 2
9/09/2014

Topic: Graphs in Economics

Graphing Data
Graph represents quantity as a distance on a line
Scale lines are called axis
Vertical line is the y-axis
Horizontal line is the x-axis
Zero point shared by both axes is called the origin
y-coordinate runs from a point to the horizontal axis
x-coordinate runs from a point to the vertical axis
A point in a graph is described by the values of its x-coordinate and y-coordinate.
We denote it like (x,y) = (10, 6)
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Types of graph

Graphs of a single variable

Pie chart
Cross-section graph- bar graph
Time series graph- reveals level and speed

Graphs of two variables

Scatter diagram
Positively related: linear relationship - straight line (increasing at a
constant rate) or non-linear relationship (increasing at
increasing/decreasing rate)
Negatively related: linear or non-linear relationship
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Slope of a relationship
Slope: how much one variable responds to the changes in another variable.
Slope = y/x; (delta) stands for change in a variable
Slope is small (large) for relatively flat (steep) line
Positive slope- y increases as x increases, upward sloping line
Negative slope- y decreases as x increases, downward sloping line
Zero slope for horizontal line, infinite slope for vertical line
Slope of a straight line is same at every point on the line

Slope of a curve is not constant

Variables having maximum and minimum

Calculating slope
Slope of a straight line

y 1st ycoordinate 2nd ycoordinate

Slope =
=
x 1st xcoordinate 2nd xcoordinate
Slope of a curve
Slope across an arc- average slope between two points
Slope at a point- draw a tangent on that point and find slope of
the straight line

Mathematically representing linear relationship

Linear equation: equation of a straight line representing relationship between
two variables. Eg. Income and expenditure

All linear equations have the same general formy = a + bx

where a and b are constants, x and y are variables (their values vary)
constant a is called the y-intercept: a point where the line intersects the y-axis
constant b is the slope of the line (i.e. b = y/x)

Position of the line is determined by y-intercept

Positive (negative) relationship has positive (negative) slope

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