be made to keep the time free.
How? One of the most frustrating problems for a professor is to have a student arrive on the day before the exam and say "I don't
understand anything you are doing in class." This doesn't help the instructor determine how to help you (it isn't practical or efficient to
start from the beginning and review an entire course). The instructor can answer specific questions, but often you may not really know
what questions to ask. Be prepared when you go to the instructor for help. Do you have specific questions? If not, what areas are you
finding difficult? Do you have difficulty with particular types of material (for example, graphs or calculations)? Is your problem with
the theory or applying it to specific situations? Answering these questions will also assist you in learning.
GRAPIC DISCUSSION
LEARNING OBJECTIVES
After studying this appendix, you should be able to:
1. Explain why economists use graphs.
2. Construct a graph showing the relationship between two variables and explain the relationship.
3. Distinguish between direct (positive) and inverse (negative) relationships.
4. Identify and explain typical economic graphs.
If you are already comfortable with the use of graphs, you can omit the following and do the self-test.
Graphic Discussion: Why so many graphs?
You probably have heard the expression "a picture is worth a thousand words." This statement is an excellent explanation of why you
see (or will soon see!) so many graphs in economics. Once people are comfortable using graphs, they can quickly grasp ideas that are
complicated when conveyed with words and would take a long time to grasp if presented verbally. A graph can convey a great deal of
information very efficiently.
For example, compare the statement and graph presented below. Which more easily conveys the idea that Jays income rose fairly
quickly through the 1990's -- the graph or the statement? Most would agree that the graph does, especially after they have finished a
course in economics!
Statement on Jay's Income
In 1990, Jay's income was $20, 000. In 1991 and 1992 it was $22, 000 and $23, 000, respectively. By 1993 it had risen to $24, 000.
Over the next three years, it rose $5, 000peryear to a total of$34, 000 in 1995. 1n1996 it remained the same, but in 199 7 and 1998 it
increased by $6, 000 annually. In 1999 and 2000, Jay received a$2000 raise. The percentage increase in Jay's income is found by
subtracting his starting income of$20, 000
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in 1990 from his year 2000 income and dividing by the initial income of $20, 000. The resulting value
indicates how fast his income grew from 1990 to 2000.
How do you feel about graphs?
Some people are more visually oriented and some are more verbally oriented. If you are visually oriented, you will appreciate the
clarity, conciseness and efficiency of a graph. However, you will be less comfortable with verbal explanations. If you are more
verbally oriented, graphs can at first seem unclear and confusing. But you are probably more comfortable if you are given a verbal
explanation. "Graphic Discussions" is for those who have not yet become comfortable with graphs and graphing. This overview of
graphing is designed to get you started. A "Graphic Detail" section for each chapter will help guide you through the use of specific
graphs found in each chapter. Remember that everything shown on a graph can be explained with words. Learning to read graphs is
sort of like leaming to speak a new language – you just have to translate what the graph says into English! Once you master this new
approach, you will see how useful graphs can be and will become conversant in the language of economics!
What are the basic parts of a graph?
Understanding the basic parts of any graph makes reading or drawing graphs much easier. The basic parts of a graph are described
below.
Variables
Variable - something that has no fixed value; it is changeable. The purpose of a graph is to present information about one or more
specific variables.
A graph is used to present information. Every graph should have a title, indicating what information is presented. Each graph presents
information about some specific variable or variables. A variable is simply something that can have different values. Graphs present
the different values of a variable visually, so they can
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be easily seen and interpreted.
For example, the graph above is showing Jay's income in the 1990's and has the title "Jay's Income." It presents
information about the variable "income." Jay's income has different values in the years 1990 - 2000. Presenting this
variable on a graph makes it clear that his income has gone up over the period.
An Axis (plural; Axes)
Axes - the straight lines used to measure (plot) variables on a graph.
A graph usually has two axes, called the "X" and "Y" axes. The "X" axis is the horizontal axis - it runs across the bottom
of a graph. The variable measured on the "X" axis is referred to as the "X" variable. It increases as you move from left to
right on the axis. The "Y" axis is the vertical axis - it runs up and down. A second variable, the "Y" variable, is measured
on the "Y" axis. It increases as you move upwards on the graph. Where the "X" and "Y" axes cross is called the origin.
This is the starting point for both axes, where both the "V and "Y" variables are zero. Economics generally deals with
variables that are positive. For example, prices, units produced and income can only go as low as zero, they can not be
negative. This means that the graphs you will see will only have positive numbers on the axes as shown below.
The "X" axis on this graph measures the quantity purchased. The "Y" axis measures price. This graph would show the
relationship between the price of something and the quantity purchased.
It is important that a graph ALWAYS have labels on the axes. The labels show the reader what the graph is discussing.
Without labels, a graph has no meaning.
A Constant
Constant - a variable that maintains the same value.
When the value of a variable stays the same, it is a constant. If the "X" variable is constant, it remains the same, regardless
of the value of the "Y" variable. If the "Y" variable is constant, it remains the same regardless of the value of the "X"
variable.
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For example, if the quantity purchased remains the same, regardless of the price charged (i.e. consumers just HAVE to have it, no
matter what the price), then quantity purchased is a constant and the graph is a vertical line (as shown on the following page). This
graph shows that consumers purchase "Q" regardless of the price charged.
In another example, sellers might receive the same price for their product, regardless of the quantity they choose to sell. This means
that price is constant and the graph is a horizontal line (as shown below). The price equals "P" for every level of quantity sold.
What types of graphs do economists use most often?
There are many different types of graphs, and economists use them all. The line graph is the type you will see most often in the text.
The following sections tell you more about understanding and constructing line graphs.
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