Skip to main content

Microeconomics (Part 1D): Graphs

1D. Graphs
Two-Variable Relationship (Part 1)
Slope (Part 1A – Section 1)
Image result for slope formula examples
- The slope of a line or curve is a measure of how steep it is. The slope of a line is measured by “rise over run” – the change in the y-variable between two points on the line divided by the change in the x-variable between those two points.

Positive and Negative Linear Relationship (Part 1A – Section 2)
- Two variables have a positive relationship when an increase in the value of one variable is associated with an increase in the value of the other variable. It is illustrated by a curve that slopes upward from left to right.
- Two variable has a negative relationship when an increase in the value of one variable is associated with a decrease in the value of the other variable. It is illustrated by a curve that slopes downward from left to right.

Zero Linear Relationship (Part 1A – Section 3)
- The horizontal intercept (zero slope) of a curve is the point at which it hits the horizontal axis; it indicates the value of the y-variable when the value of the x-variable is zero.
- The vertical intercept (infinite slope) of a curve is the point at which it hits the vertical axis; it shows the value of y-variable when the value of the x-variable is zero.

Infinity Linear Relationship (Part 1A – Section 4)
Image result for infinite slope
- An infinite slope is a vertical line.
- When you plot it on a line graph, an infinite slope is any line which runs parallel to the y-axis.

Nonlinear Curve (Part 1B- Section 1)
- A nonlinear curve is one in which the slope is not the same between every pair of points.

Positive and Negative Nonlinear Curves (Part 1B - Section 2)
- A positive increasing slope is a curve that is upward sloping and gets steeper. (Concave Up, Slopes Increasing)
- A positive decreasing slope is a curve that is upward sloping but gets flatter. (Concave Down, Slopes Decreasing)
- The absolute value of a negative number is the value of the negative number without the minus sign.
- Negative increasing slope is when the absolute value of the slope steadily increases as you move from left to right. (Concave Up, Slopes Increasing)
- Negative decreasing slope is when the absolute value of the slope steadily decreases along the curve. (Concave Down, Slopes Decreasing)

Maximum and Minimum Points (Part 1B – Section 3)
- A nonlinear curve may have a maximum point, the highest point along the curve.  At the maximum, the slope of the curve changes from positive to negative.
- A nonlinear curve may have a minimum point, the lowest point along the curve. At the minimum, the slope of the curve changes from negative to positive.
- An arc of a curve is some piece or segment of that curve.

Reverse Causality (Part 1C)
Image result for reverse causality
- The error of reverse causality is committed when the true direction of causality between two variables are reversed.

Multiple-Variable Relationship (Part 2)
Correlation Is Not Causation (Part 2A)
Image result for correlation is not causation

- An omitted variable is an unobserved variable that, though its influence on other variables, creates the erroneous appearance of a direct causal relationship among those variables. 

Other-Things-Being-Equal Assumption (Part 2B)
- The other things equal assumption means that all other relevant factors remain unchanged.

Two-Dimensional Graph (Part 2C)
- In a causal relationship, the determining variable is called the independent variable.
- In a causal relationship, the variable it determines is called the dependent variable.
- If the curve is a straight line, the variables have a linear relationship.
- If the curve is not a straight line, the variables have a nonlinear relationship.

Popular posts from this blog

ECON 120: Friday 12/06 Lecture Notes

ECON 120 Friday, December 6, 2019 Lecture Notes 29. Which of the following statements is TRUE? a. Airlines enhance profit by bundling, whereas Microsoft enhances profit by unbundling. b. The market demand for labor has an upward sloping segment (violating the “law of demand”) c. It is normal for firms to have a negative marginal cost. d. McDonald’s is primarily a real estate company.

ECON 120: Wednesday 12/04 Lecture Notes

ECON 120 Wednesday, December 4, 2019 Lecture Notes Club good is an artificially scarce good. - Opposite of common resource. - Made excludable but lacks depletability. - It is “nonrival in consumption” or nondepletable. Strategic Situations and Decisions: 1 st Issue: Public Good with Private Monopoly or Market Power Make Excludable: Microsoft, Apple (positive price) Or Make Profit Indirectly: Facebook, Google (free price = zero) Determinants: 1. Risk Preference 2. Amount of Cash 3. Market Forecast (strength of network externalities) 2 nd Issue: Bundled Goods Bundle: Microsoft Office, McDonald’s Meal, “all you can eat” buffets” Unbundle: Air travel, a la carte meals Determinants: 1. Consumer preferences 2. Capacity constraints 3. Dissimilarity of consumer groups 3 rd Issue: Add-Ons Standard Plus Set (Group) of specified add-ons: Automobiles Standard Plus Individual Add-Ons: Some appliances Determinants: 1. Cost structure,

ECON 120: Friday 11/22 Lecture Notes

ECON 120 Friday, November 22, 2019 Lecture Notes If a good is illegal, the supply curve shifts UP and the marginal cost INCREASES. If a good is illegal, the demand curve shifts DOWN and the quantity will DECREASE. Inefficiencies if the commodity is ILLEGAL: 1. Total Surplus FALLS, Quantity FALLS 2. Quality of Good FALLS 3. Violence One of the most effective ways to increase crime is to declare an addictive commodity ILLEGAL. An addictive commodity is very inelastic. To punish demanders of an addictive commodity: Work on reducing demand by 1. Propaganda “Just Say No” 2. Punish customers (Demand shifts down, Price falls, Quantity falls, Crime falls) 3. Make everything legal.