Econ 104 - 2

Econ 104 - 2 - Economic theories A theory consists of: a...

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Economic theories a set of definitions about variables Variable = something measured by a number Examples: price and quantity View two variables together to see if they exhibit a relationship. a set of assumptions motives, physical relations, direction of causation a set of predictions (or hypotheses ) A theory consists of:
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Graphing Functional Relations The relationship between two variables may be positive or negative . If the graphs of these relationships are straight lines, the variables are linearly related to each other. Otherwise, variables are said to be non-linearly related.
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Correlation Positive correlation means only that X and Y move together. Negative correlation means that X and Y move in opposite directions .
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Expenditure for Personal Computer at Different Annual Incomes Personal Expenditure Annual Income $1,000 $2,000 $3,000 $4,000 $10,000 $20,000 $30,000 $40,000
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Quantity of Compact Discs Consumers Purchased at Different Prices Price per compact disc Quantity of compact discs $20 $15 $10 25,000,000 50,000,000 75,000,000 $5 100,000,000
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Econ 104 - 2 - Economic theories A theory consists of: a...

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