Graphs in Economics

Graphs, Variables, and Economic Models

A quantity that can take on more than

one value is called a variable.

The line along which values of the x variable are measured is

called the horizontal axis or x-axis.
The line along which values of the y-variable are
measured is called the vertical axis or y-axis.
The point where the axes of a two-variable graph meet is the
origin.
A causal relationship exists between two variables when the
value taken by one variable directly influences or determines the
value taken by the other variable.
In a causal relationship, the determining variable is called the
independent
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variable; the variable it determines is called the
dependent variable.
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 A curve is a line on a graph that depicts a
relationship between two variables.
It may be either a straight line or a curved line.
If the curve is a straight line, the variables have
a linear relationship. If the curve is not a
straight line, the variables have a nonlinear
relationship.

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Two variables have a positive relationship when an increase in the
value of one variable is associated with an increase in the value of
the other variable.
It is illustrated by a curve that slopes upward from left to right.

Two variables have a negative relationship when an increase in

the value of one variable is associated with a decrease in the value
of the other variable.
It is illustrated by a curve that slopes downward from left to right.

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 The horizontal intercept of a curve is he point at which it hits
the horizontal axis; it indicates the value of the x variable
when the value of the y variable is zero.

The vertical intercept of a curve is the point at which it hits the

vertical axis; it shows the value of the y-variable when the
value of the x-variable is zero.

The slope of a line or curve is a measure of how steep it is. The

slope of a line is measured by “rise over run”— the change in
the y-variable between two points on the line divided by the
change in the x-variable between those same two points.
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 A nonlinear curve is one in which
the slope is not the same between
every pair of points

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 The slope of a Nonlinear Curve

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 Calculating the slope along a
Nonlinear Curve

2 methods :

1) The arc method of calculating the slope

2) The point method of calculating the

slope

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 The arc method

An arc of a curve is some piece or segment of that curve.

To calculate the slope along a nonlinear curve using the

arc method, you draw a straight line between the two
endpoints
of the arc. The slope of that straight line is a measure
of the average slope of the curve between those two
end-points.
Ex.
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 The point method

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 Maximum and minimum points

A nonlinear curve may

have a maximum point,
the highest point along
the curve. At the
maximum, the slope of
the curve changes from
positive to negative.

A nonlinear curve may

have a minimum point,
the lowest point along
the curve. At the
minimum, the slope of
the curve changes from
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 Calculating the area below or above
the curve

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