Session 2 Graphs & Tables (1)

8/2/2019 Session 2 Graphs & Tables (1)

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ECONOMICS

The Use of Graphs &Tables

SESSION 2


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A picture is worth a thousand words.(Chinese Proverb)

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Objectives

Learn how to calculate slope of thecurve.

Differentiate between dependentand independent variables.

Learn how to measure opportunitycost.


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GRAPHS AND TABLES

GRAPH

It is a diagram showing how two or more sets of

data or variables are related to one another.(Cause & Effect)

Graphs are essential in economics because,they allow us to analyze economic concepts &examine historical trends.


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Purpose of a Graph

The basic purpose of a graph is toillustrate a relationship between two

variables. Example: relationship between grades &

study hours.


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How to Plot a Graph?

The horizontal line on a graph is referredto as the horizontal axis, or the X axis.

The vertical line is known as vertical axisor Y axis.

The vertical line at left and horizontal line

at the bottom correspond to the variables:


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TABLEPossibilities Study Time Grade Points

(in Hours)

A 16 4.0 (A)

B 14 3.5 (B+)C 12 3.0 (B)

D 10 2.5 (C+)

E 08 2.0 ( C )

F 06 1.5 (D+)

G 04 1.0 (D)


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Y

X0 2 4 6 8 10 12 14 16

1

2

3

4

Hours of study

G

rade

s


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TABLE

Possibilities Food machines

A 00 150

B 10 120

C 20 90

D 30 60

E 40 30F 50 00


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GRAPH

food

500 10 20 30 40

150

120

90

60

30

Ma

ch

ines

AB

C

F


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Relationships

Direct Relationship occurs when variablesmove in the same direction (i.e. they increase ordecrease together)

Inverse Relationship occurs when variablesmove in opposite directions (i.e. one increases

as the other decreases)


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Relationships

A positive or direct relationship is said to existwhen variables move in the same direction.

A negative or inverse relationship is said toexist when variables move in the oppositedirection.

Variables are independent (unrelated) if one

variable remains constant when the otherchanges.


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Intercepts

Where the graph crosses the x-axisis thex-intercept. It coordinates (a,0).

Where the graph crosses the y-axisis they-intercept. It coordinates (0,b).


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y

xx-intercept

y-intercept

(a,0)

(0,b)

The xand yintercepts of a line


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Direct versus InverseRelationships

Y variable

X Variable

Direct Relationship

(positive) upward slopingto the right.

Inverse Relationship

(negative) downwardsloping to the right.


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Direct Relationships

Data Point Community Yearly Rainfall Umbrella Sales

A Center City 30 inches 100 units

BMoose

Haven40 inches 200 units

C Blountville 50 inches 300 units

D Houckton 60 inches 400 units

E Echo Ridge 70 inches 500 units


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Positive Slope

100

200

300

400

500

10 20 30 40 50 60 70 80

10

100

Slope = 100/10 = 10

UmbrellaSales

Yearly

Rainfall

A

B

C

D

E


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Inverse Relationships

Data Point City Coat Sales

Average

January

Temperatures

F Tropical City 100 units 50 degrees

G North Town 200 units 40 degrees

H Snowbound 300 units 30 degrees

I Cold City 400 units 20 degrees

J Arctica 500 units 10 degrees


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Negative Slope

100

200

300

400

500

10 20 30 40 50 60 70 80

Slope = -100/10 = -10

-100

10

J

I

H

G

F

Sales ofwoolencoats

Januarytemperatures


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Information at the Margin

IncrementalSpending

Hours

50

75

100

01 2 3

-25

1

The slope shown equals25, which means thatthe additional spending

by restaurant customersdecreases by $25 witheach passing hour.


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Nonlinear Relationships

(a) Decreasingly positive slope (b) Decreasingly positive slope

(c) Decreasingly negative slope (d) Increasingly negative slope


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A Shift in the Curve

100

200

300

400

500

10 20 30 40 50 60 70 80

UmbrellaSales

Yearly

Rainfall

A

B

C

D

E

When a curve changesposition, we say there

has been a shift in thecurve. A shift representsa new relationshipbetween the variables.


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An Intersection Point

Y

X

Curve 1

Curve 1

A

At the intersection pointof two curves, their valuesare identical.


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How To FindTHE SLOPEofa Line Given Two Points


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Slope of a Line

x

y

x1 x2

y2

y1

x2 x1

y2

y1

m

rise

run

y2

y1

x2

x1

x1,y

1

x2,y

2


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Definition of Slope

The slope of the line is its measure ofsteepness. It measures the rate of

changeof the line. In all lines the slope isconstant, it doesnt change no matterwhere you are at on the line.


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Slope

Slope focuses on change

It tells us how much the X variable changes

when the Y variable changes. If the slope is a positive number, there is a

positive relation between X & Y.

If the slope is negative, there is a negativerelation between X & Y.


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Slope

For a straight line, the slope is calculatedasy /x

For a nonlinear function, the slope isapproximated by calculating the slope of atangent.


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Domain and Range

The values that make up the set ofindependentvalues are the domain.

The values that make up the set ofdependentvalues are the range.


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Domain Range

Correspondenceor

Relation


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y f x Output Value

Member of the Range Dependent Variable

These are all equivalentnames for the y.

Input Value

Member of the Domain Independent Variable

These are all equivalentnames for the x.

Name of thefunction


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The Production Possibilities

Frontier The production possibilities frontier is a

graph showing the various combinations of

output that the economy can possiblyproduce in given available factors ofproduction and technology.


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Ideas Illustrated by the

Production Possibilities Frontier Efficiency

Trade-offs

Opportunity Cost

Economic Growth


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Trade Off vs Opportunity Cost

Trade Off: exchange of commodities betweengroups, individuals or countries. When choicesare made to accept having less of one thing in

order to get more of other thing.Opportunity Cost or Economic Opportunity:

loss in value of next best alternative forgone asthe result of making decision. It is the value ofnext best choice that one gives up when makinga decision.


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The Production Possibilities Frontier

3,000

2,000

ProductionPossibilitiesFrontier

A

Quantity ofCars Produced

7000 1,000

Quantity ofComputers

Produced


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3,000

2,000


A


7000 1,000


Produced

An efficientpoint ofproduction is

the point A


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3,000

2,000


A


7000 1,000


Produced


the point A2,200

600

C

C is another efficient point: Thetrade-off involved is 200 morecomputers and 100 less cars


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3,000

2,000


A


7000 1,000


Produced


the point A2,200

600

C

C is another efficient point: Thetrade-off involved is 200 morecomputers and 100 less cars

B

The point B isinefficient


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3,000

2,000


7000 1,000

Quantity ofComputersProduced

2,200

600

4,000 Economic growth isillustrated by a shiftoutwards in theProductionPossibilities Frontier


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Technologically Efficient andFeasible Points

Good X

Not

Feasible

Feasible butInefficient

All points on the PPFare are technologically

efficient and feasible.


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Whenever the production

possibility frontier shifts outward,

the economy is said to haveexperiencedeconomic growth.

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ECONOMIC GROWTH


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Economic Growth

Good X

Economic growthcan be caused by an

increase inresources.


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Economic Growth

Good X

Negative Economicgrowth can becaused by thedestruction of

resources, such as

from disasters orwar.


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Q.1. Assume that the schedule below describesthe production possibilities confronting an

economy. Using the information from the table:(a). Draw the PPF. Be sure to label eachalternative output combination (A through E).

(b). Calculate & illustrate on your graph the

opportunity cost of producing one CD player perweek.

(c ). What is the cost of producing a second CDplayer?

(d). Which point on the curve is the most desiredone? How will you find out that point?


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Potential Weekly

Output combinations Pianos CD Players

A 10 0

B 9 1

C 7 2

D 4 3

E 0 4


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End of the Session 2

Quote of the Day:

An economist is an expert who will knowtomorrow why the things he predictedyesterday didnt happen today.

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Session 2 Graphs & Tables (1)