APPENDIX TO CHAPTER 1 This appendix is to prepare students for reading

Appendix to chapter 1 this appendix is to prepare

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APPENDIX TO CHAPTER 1 This appendix is to prepare students for reading, analyzing, and constructing simple graphs in later chapters. To determine which students need help in this area, the instructor may want to give a brief pretest. In other words, you may want to excuse those students who already have graphing skills from this review. For students who do need help in this area, software graphics tutorials are also very useful, especially the ones designed to accompany the text. I. Graphs and Their Meaning 1-8
Chapter 01 - Limits, Alternatives, and Choices A. Graphs help students to visualize and understand economic relationships. Most of our economic models explain relationships between just two sets of economic facts. B. Constructing a two-dimensional graph involves drawing a horizontal and a vertical axis. 1. Mark the axis using convenient increments and fitting the data given. 2. Each point on the graph yields two pieces of information, the quantity of the variable on the horizontal axis and the corresponding quantity of the variable on the vertical axis. C. Direct and inverse relationships 1. If two variables change in the same direction (an increase in one is associated with an increase in the other) it is a direct or positive relationship. 2. If the two sets of data move in opposite directions, they are inversely or negatively related. D. Dependent and independent variables: 1. Economists are often interested in determining which variable is the “cause” and which is the “effect” when two variables appear to be related. 2. Mathematicians are always consistent in applying the rule that the independent variable or “cause” is placed on the horizontal axis and the dependent variable or outcome (effect) is placed on the vertical axis. 3. Economists are less tidy, and traditionally have put price and cost data on the vertical axis. 4. Note that inverse relationships are downward sloping to the right and direct relationships are upward sloping to the right regardless of which variable is placed on the horizontal or vertical axis. E. Other things equal 1. When economists plot the relationship between two variables, all other influences are assumed to remain exactly the same (ceteris paribus). 2. If any of the other factors do change, a new plot of the relationship must be made. 3. This point is extremely important for student understanding of the market model developed in chapter 3. It provides the distinction between a “slide” along an existing curve, and the “shift” of a curve that is required if a variable not labeled on the axis is changed. F. The slope of a straight line is the ratio of the vertical change to horizontal change between any two points on the line. Some students will remember this as “rise over run.” 1. The slope of a line will be positive if both variables change in the same direction (a positive or direct relationship).

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