4.3 The interpretation & use of graphs

Question 1

What is the purpose of graphs?

Answer 1

To help visualize and better understand the functioning of the economy and its components.

Question 2

Core elements of a graph?

Answer 2

• origin
• axis
• lines
• curves / functions

Question 3

What is a graph?

Answer 3

• visual aids used to communicate information in a small space.
• help economists to see relationships visually.
• show economic statistical data visually.

Question 4

What are graphs used for?

Answer 4

• to depict economic facts and figures visually.
• to visually illustrate economic theory / models.

Question 5

Axis

Answer 5

• 2 axis:
  x axis = horizontal axis
  y axis = vertical axis
• the 2 axis cross at 0
• which results in 4 quadrants.

Question 6

Scale of a graph

Answer 6

if a scale is decided, it should be used for the entire axis.
equal distances on each axis must reflect the same amount.

Question 7

Graphic representation

Answer 7

Independent variable is shown on the horizontal axis.
dependent variable is shown on the vertical axis.

this allows us to visualize the relationship between the variables &
how changes of the independent variable affect the dependent variable.

Question 8

Relationships between variables

Answer 8

Positive / direct relationship
Negative / inverse / reverse relationship.

Question 9

Linear relationships

Answer 9

Straight lines are aka linear relationships.

Question 10

Non-linear relationships

Answer 10

Curved

Question 11

Direct / positive relationships

Answer 11

If one variable increases, the other will also increase.

Question 12

Inverse / negative relationships

Answer 12

If the one variable increases, the other decreases, and vice versa.

Question 13

Direct linear example

Answer 13

Supply curve
relationship between quantity supplied and price.

Question 14

Direct non-linear example

Answer 14

Increasing part of a firm’s marginal cost.

Question 15

Inverse linear example

Answer 15

Demand curve
relationship between quantity demanded and the price.

Question 16

Inverse non-linear example

Answer 16

Decreasing part of the curve that represents the marginal product or marginal physical product of a production factor.

Question 17

What does the slope of the graph indicate?

Answer 17

The slope indicates how much the one variable reacts if there is a change in the other variable.

Relative steepness

Question 18

What is the advantage of using the equation of a linear function?

Answer 18

One of the advantages of using the equation of a linear relationship between two variables is that the equation contains information about the intercept and the slope of the function.