Chapter 1AGraphs and Their Meaning

McGraw-Hill/Irwin Copyright © 2015 by McGraw-Hill Education. All rights reserved.

Construction of a Graph

• Graph• A visual representation of the relationship

between two variables• Horizontal axis• Vertical axis• Independent variable• Dependent variable• Ceteris paribus

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Direct and Inverse Relationships

• Direct relationship• Both variables move in the same direction

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Construction of a Graph

Table GraphIncome Consumption Point

$ 0

100

200

300

400

$ 50

100

150

200

250

a

b

c

d

e

Cons

umpti

on (C

)

Income (Y) $100 200 300 400

ab

c

d

e

$400 300 200

100

0

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Direct and Inverse Relationships

• Inverse relationship• Variables move in opposite directions

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a

b

c

d

e

f

Construction of a GraphTable Graph

TicketPrice

Attendance,Thousands Point

$ 50

40

30

20

10

0

0

4

8

12

16

20

Tick

et p

rice

(P)

Attendance in thousands (Q) 4 8 12 16 20

a

b

c

d

e

$ 50 40 30

20

10

0 f

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Slope of a Line

• Slope• Slopes and measurement units• Slopes and marginal analysis• Infinite and zero slopes

• Vertical intercept

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Positive Slope of a Line

Slope =vertical change

horizontal change+50

+100 = 0.5==12

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Cons

umpti

on (C

)

Income (Y)

$400 300 200

100

0

50

100

Verticalchange

Horizontal change

Negative Slope of a Line

Slope =vertical change

horizontal change= -10

+4 =12-2 = -2.5

50

40

30

20

10

4 8 12 16 20

-10

4Horizontal change

VerticalchangeTi

cket

Pric

e $

AttendanceLO8

Slope of a LinePr

ice

of B

anan

as

Cons

umpti

on

Purchases of watches Divorce rate

Slope = infinite

Slope = zero

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Equation of a Linear Relationship

• y = a + bx, where• y is the dependent variable• a is the vertical intercept• b is the slope of the line• x is the independent variable

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Equation of a Line

Cons

umpti

on (C

)

Income (Y) $100 200 300 400

$400 300 200

100

0

Y = 50 + .5C

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Equation of a Line

P = 50 – 2.5Q50

40

30

20

10

4 8 12 16 20

Tick

et p

rice

AttendanceLO8

Slope of a Nonlinear Curve

• Slope always changes• Use a line tangent to the curve to find slope at

that point

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Slope of a Nonlinear Curve

20

15

10

5

0

5 10 15 20LO8