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Chapter 1A
Graphs and Their Meaning
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
1A-2
Construction of a Graph
• Graph• A visual representation of the relationship
between two variables• Horizontal axis• Vertical axis• Independent variable• Dependent variable• Ceteris paribus
LO8
1A-3
Direct and Inverse Relationships
• Direct relationship• Both variables move in the same direction
LO8
1A-4
Construction of a Graph
Table GraphIncome Consumption Point
$ 0
100
200
300
400
$ 50
100
150
200
250
a
b
c
d
e
Cons
umpti
on (C
)
Income (Y) $100 200 300 400
a
b
c
d
e
$400 300 200
100
0
LO8
1A-5
Direct and Inverse Relationships
• Inverse relationship• Variables move in opposite directions
LO8
1A-6
a
b
c
d
e
f
Construction of a Graph
Table GraphTicketPrice
Attendance,Thousands Point
$ 50
40
30
20
10
0
0
4
8
12
16
20
Tick
et p
rice
(P)
Attendance in thousands (Q) 4 8 12 16 20
a
b
c
d
e
$ 50 40 30
20
10
0 f
LO8
1A-7
Slope of a Line
• Slope• Slopes and measurement units• Slopes and marginal analysis• Infinite and zero slopes
• Vertical intercept
LO8
1A-8
Positive Slope of a Line
Slope =vertical change
horizontal change+50
+100 = 0.5==12
LO8
Cons
umpti
on (C
)
Income (Y)
$400 300 200
100
0
50
100
Verticalchange
Horizontal change
1A-9
Negative Slope of a Line
Slope =vertical change
horizontal change= -10
+4 =12-2 = -2.5
50
40
30
20
10
4 8 12 16 20
-10
4Horizontal change
VerticalchangeTi
cket
Pric
e $
AttendanceLO8
1A-10
Slope of a LinePr
ice
of B
anan
as
Cons
umpti
on
Purchases of watches Divorce rate
Slope = infinite
Slope = zero
LO8
1A-11
Equation of a Linear Relationship
• y = a + bx, where• y is the dependent variable• a is the vertical intercept• b is the slope of the line• x is the independent variable
LO8
1A-12
Equation of a Line
Cons
umpti
on (C
)
Income (Y) $100 200 300 400
$400 300 200
100
0
Y = 50 + .5C
LO8
1A-14
Slope of a Nonlinear Curve
• Slope always changes• Use a line tangent to the curve to find slope at
that point
LO8