Understanding Graphs and Economic Relationships in Macroeconomics
This chapter explores the importance of graphs in clarifying economic relationships and presenting data effectively. It explains how line graphs, bar charts, and pie charts depict factual information, while curves represent economic models. The chapter distinguishes between direct and inverse relationships, showing how variables interact positively and negatively. Additionally, it discusses the concept of marginal information and shifts in curves, indicating new relationships as economic conditions change. The intersection points of curves highlight where values are equal, guiding economic analysis further.
Understanding Graphs and Economic Relationships in Macroeconomics
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Presentation Transcript
MACROECONOMICS: EXPLORE & APPLYby Ayers and Collinge Chapter 1Appendix
Working with Graphs and Data • Graphs clarify thoughts and show economic relationships in a way that can be more easily understood that with words alone.
Working with Graphs and Data • Graphs that present factual information are often drawn as line graphs, bar charts, and pie charts. • Other graphs represent economic models and contain lines that are referred to as curves.
Direct versus InverseRelationships Y variable Direct Relationship (positive) upward sloping to the right. Inverse Relationship (negative) downward sloping to the right. X Variable
E D 100 C B 10 A Positive Slope Umbrella Sales 500 Slope = 100/10 = 10 400 300 200 100 Yearly Rainfall 10 20 30 40 50 60 70 80
J I -100 H 10 G F Negative Slope Sales of woolen coats 500 Slope = -100/10 = -10 400 300 200 100 January temperatures 10 20 30 40 50 60 70 80
-25 1 Information at the Margin The slope shown equals –25, which means that the additional spending by restaurant customers decreases by $25 with each passing hour. Incremental Spending 100 75 50 0 Hours 1 2 3
E D C B A A Shift in the Curve Umbrella Sales When a curve changes position, we say there has been a shift in the curve. A shift represents a new relationship between the variables. 500 400 300 200 100 Yearly Rainfall 10 20 30 40 50 60 70 80
At the intersection point of two curves, their values are identical. A An Intersection Point Y Curve 1 Curve 1 X
The End! Next Chapter 2 “Production and Trade"
