Econ 2 Files
Econ 2 Lecture
Notes
Lecture 1: Using Graphs in Economics
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Economics 2 |
Lecture 1 - Using Graphs in Economics
the syllabus
what is economics?
using graphs in economics
The Syllabus
You ought to read the whole syllabus at your leisure. Here are the highlights:
- the recommended textbook is the 7th edition of Boyes and Melvin, but any microeconomic principles textbook will do
- there are 4 hourly non-cumulative exams and a cumulative final exam
- your 5 best quiz scores will be used to compute your quiz grade
What is Economics?
Economics is the study of how people in a society meet their material needs.
Most topics in economics can be placed in one of two categories: (1) microeconomics, which looks at the behavior of individual decision makers, or (2) macroeconomics, which studies the entire national economy.
Using Graphs in Economics
Economics is often concerned with the relationship between two variables, that is, how does a change in one variable affect another variable. How does a rise in interest rates affect the level of employment? What happens to gasoline consumption when the price of oil goes up?
Economists use many graphs in their work. A graph is a visual representation of the relationship between two variables.
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A graph of this data shows how consumption spending changes as income changes. Since income is the cause or determining factor, income is the independent variable. Usually, the independent variable is plotted along the horizontal axis. Since consumption spending depends on income, consumption is the dependent variable. The independent variable will cause an apparent change in the dependent variable
Notice that the two variables change in the same direction: when income rises, consumption rises and when income falls, consumption falls. There is a direct or positive relationship between income and consumption spending. When there is a direct relationship between two variables the line is upward sloping.
When two variables change in opposite directions, they have an inverse or negative relationship. The line will be downward sloping.
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These graphs assume (1) that all the factors other than income that might affect consumption spending are presumed to be constant or unchanged and (2) that anything other than ticket price which might influence attendance is constant.
In the real world things often change and when they do the relationships in the tables and graphs will change. This means that the lines will shift to a new location. Consider a stock market crash. People will feel less wealthy so they will spend less at each level of income. So, the consumption line will shift downwards. And, suppose a minor league team affiliated with the Orioles moves to York. Attendance at York Revolution games might be less at each ticket price. So, the line shifts down.
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David A. Latzko Business and Economics Division Pennsylvania State University, York Campus office: 13 Main Classroom Building phone: (717) 771-4115 fax: (717) 771-4062 e-mail: 
web: www.yk.psu.edu/~dxl31 |
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