Presenting the material give an example of data and

Presenting the Material
Give an example of data and how a graph is set up, then explain how to interpret the
graph.
Year Health expenditures as a percent of GDP
1950 4.5%
1960 5.3
1970 7.1
1980 8.9
1990 12.2
2000 13.4
(Source: The Economics of Health and Health Care, S. Folland, A. Goodman, and M.
Stano. Prentice Hall, 2001.)
Ask students the following questions:
1. With health expenditures as a percent of GDP on the vertical axis of a
graph and years on the horizontal axis of the graph, plot the data on the
graph.
2. Is the line positively or negatively sloped? (It is positively sloped; as the
years have increased, the percent share of GDP has increased.)
3. Is it a linear function? (No, the line is not a straight line.)
4. What does the graph not tell us? (It does not indicate what is causing the
increase in health expenditures as a percent of GDP.)
Common Student Pitfalls
Students forget the basic setup of a graph: that each point on the graph refers to a specific
quantity on the vertical axis and horizontal axis. Use a demand curve to illustrate: point
A on the demand curve means that at a price of $1.00, consumers will buy 200 of the
good, for example. You may want to point out which axis on the graph is referred to as
the vertical axis and which is the horizontal axis.
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CHAPTER 2 ECONOMIC MODELS: TRADE-OFFS AND TRADE

Activity
Causal Relationships (5–10 minutes)
Ask students to think of some causal relationships between health expenditures and
other variables. Identify the variables that may increase or decrease health expenditures.
What is the dependent variable? (Health expenditures.) What independent variables can
influence total health spending as a percent of the GDP? (Some possibilities: percentage
of population over 55, government-mandated health programs, percentage of population
who are smokers, degree of bureaucracy in medical care structure, etc.)
CHAPTER 2 ECONOMIC MODELS: TRADE-OFFS AND TRADE
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