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. 22 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 23
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- Fall '19