Aug 21, Ceteris paribus is a Latin phrase that means "all other things being equal. of ceteris paribus allows you to understand the theoretical relationship You would have found that commodities traders, afraid to enter the stock. Apr 4, Ceteris paribus is a Latin phrase usually rendered as "all other things being equal. Put another way, it helps the economist circumvent human nature and the So an economist instead applies ceteris paribus, which essentially says if . relationship between total consumption and gross national income. Miller et al. define a graph as "a visual representation of the relationship More height is going to mean, ceteris paribus (other things being equal), There are various kinds of graphs used in business and economics that illustrate data.
Conceptual 57 As you devote more hours to studying, your snowboarding skills decrease. A graph of this relationship would show A a negative relationship. B a direct relationship. C an inverse relationship. D Both answers A and C are correct. Conceptual 58 If the quantity of wood purchased decreases when the price of wood rises, a graph representing these variables would have A time on the vertical axis.
B the slope on the vertical axis. C a negative slope. D a positive slope. Conceptual 60 In the above figure, a negative relationship is demonstrated in which of the graphs?
If the price of jelly was placed on the vertical axis and the price of peanut butter was placed on the horizontal axis, the relationship would be a A negative relationship, also called a direct relationship. Analytical 61 The above figure depicts a A positive non-linear relationship between age and the number of hamburgers purchased per year. B negative non-linear relationship between age and the number of hamburgers purchased per year. C positive linear relationship between age and the number of hamburgers purchased per year.
D negative linear relationship between age and the number of hamburgers purchased per year. B between point B and point C. C along the entire curve.
D at nowhere along the curve. Analytical 63 In the above, a positive relationship between price and quantity is shown in A Figure A.Graphing Relationships
Analytical 64 In the above figure, a negative relationship between price and quantity is shown in A Figure A. Analytical 67 In the above table, the maximum productivity growth equals A 2. Conceptual 65 If as a firm expands its output, cost per unit of output average cost decreases and then increases, then average cost and output have A a relationship with a minimum.
B a relationship with a maximum. D a linear positive relationship.
A Decade s s s s s s s s s s Productivity growth percent 1. Analytical 66 In the above table, two minimum points in the table are the decades of A s and s. B s and s. C s and s. D s and s. Analytical 68 In the above figure, the relationship between the tax rate and tax revenue is positive and becoming less steep between tax rates of A 0 percent and 30 percent. B 30 percent and percent. C 0 percent and percent. D None of the above answers are correct. Analytical 69 In the above figure, if the tax rate is increased from 20 percent to 30 percent, tax revenue A decreases.
D may increase or decrease. Analytical 70 In the above figure, tax revenue is at a maximum when the tax rate is A 0 percent. Variables That Are Unrelated Skill: Recognition 75 Monthly precipitation and monthly cable TV bills A are linearly related. B are positively related. D Both answers A and B are correct. Maximum and Minimum Points Skill: Conceptual 71 As a curve approaches a maximum point, the slope will A be positive, then negative after the maximum point. B be negative, then positive after the maximum point.
C remain constant on either side of the maximum point. D increase before and after the maximum point. Recognition 76 When y changes, x stays the same. The line depicting this relationship would be A vertical. C linear with a negative slope. D linear with a positive slope. Analytical 79 A graph measures y on the vertical axis and x on the horizontal.
The curve on the graph is a horizontal line. From this fact we know that A the value of x never changes. B the value of y does not depend on the value of x. C the ratio of x to y is constant. D the slope of the line is not defined because y never changes. Analytical 77 Which of the following correctly describes the above figure? II The value of variable measured on the y-axis is constant as the variable measured on the xaxis increases. The curve on the graph is a vertical line. From this fact we know that A the value of x does not change when the value of y changes.
B the value of y is constant. D the ratio of y to x is constant. Conceptual 81 The graph of two variables, x and y, is a horizontal line. This result indicates that x and y are A positively related. Analytical 82 Consider a diagram in which the variable measured on the y-axis remains constant while the variable measured on the x-axis increases. The graph is of this relationship is A a perpendicular line.
B a line with slope equal to zero. C a line that has positive slope. D a line that has a negative slope. The quantity of tomatoes remains constant as the quantity of coffee increases. The graph of these data is A a horizontal line. B a vertical line. C a positively sloped line. D a negatively sloped line Answer: Conceptual 83 An independent relationship between two variables is shown in a graph by A an upward-sloping line. B a horizontal or a vertical line. C a downward-sloping line.
D a steeply sloped line. Analytical 84 If two variables are unrelated, a scatter diagram of those variables will A be a vertical line. B be a horizontal line. C be either a vertical or horizontal line. D have a constant positive slope. Analytical 86 In the above figure, which curve indicates that the level of food production does not affect the population growth rate?
C The Slope of a Relationship Topic: The Slope of a Relationship Skill: Analytical 85 Which of the following correctly describes the above figure? A There is no relationship between x and y. B There is a positive relationship between x and y. C There is a negative relationship between x and y. A 87 The slope of a line equals A the change in the variable measured along the xaxis divided by the change in the variable measured along the y-axis.
B the change in the variable measured along the yaxis divided by the change in the variable measured along the x-axis. C the change in the variable measured along the xaxis minus the change in the variable measured along the y-axis. D the change in the variable measured along the xaxis multiplied by the change in the variable measured along the y-axis.
The Slope of a Straight Line Skill: Analytical 88 The slope of a positive relationship is A positive. C positive to the right of the maximum point and negative to the left.
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D constant as long as the relationship is nonlinear. When x equals 20, y equals When x equals 32, y equals A A negative; 8 B negative; 6 C positive; 5 D positive; 3 Answer: Analytical 93 The slope of a straight line is 3.
When x equals 10, y equals When x equals 11, y equals A Analytical 94 Along a straight line, when x equals 90, then y equals When x equalsthen y equals Analytical The slope of a straight line is variable. C 95 Along a straight line, the value of y is always equal to the value of x. The slope of the line is A —1. B a positive relationship between y and x. C a negative relationship between y and x. D no relationship between y and x.
The Slope of a Curved Line Skill: B a negative relationship between y and x.
C an independent relationship between y and x. B the change in price divided by the change in quantity. C the change in quantity divided by the change in price. D price divided by quantity. Thus there is A no relationship between y and x. C a positive relationship between y and x. D an independent relationship between y and x. Conceptual On a graph, an upward-sloping curve that is flatter as you move away from the origin indicates A a positive relationship with an increasing slope.
B a positive relationship with a decreasing slope. C a negative relationship with an increasing slope. D a negative relationship with a decreasing slope.
The Slope Across an Arc Skill: Conceptual The formula for the slope across an arc is used to approximate the slope for A linear relationships only. B a curved line. C a positive relationship only. D a negative relationship only. Conceptual The slope of a curved line can be approximated by A the average of the variable measured along the yaxis divided by the average of the variable measured along the x-axis.
B the inverse of the straight-line method. C the average of the variable measured along the xaxis divided by the average of the variable measured along the y-axis.
D the slope across an arc from one point on the curve to another point on the curve. The Slope at a Point Skill: Analytical In the above figure, the slope at point b is A 1. Analytical In the above figure, the relationship between x and y is A positive, with slope decreasing as x increases. B negative, with slope decreasing as x increases. C negative, with slope increasing as x increases. D positive, with slope increasing as x increases. Analytical The slope in the above figure is A negative and increasing.
B negative and decreasing. C positive and increasing. D positive and decreasing. Recognition Ceteris paribus when graphing a relationship refers to A letting all the variables change at once. B changing the origin of the graph. C holding constant all but two variables. D rescaling the coordinates.
Analytical In the above figure, the slope across the arc between a and b is A 1. Analytical In the above figure, the x-coordinate of point b is A 1. Analytical In the above figure, the y-coordinate of point b is A 1. D In evaluating a relationship between x and y, ceteris paribus means other variables A are not relevant to x and y.
B move in opposite directions to x and y. C are not changing while x and y change. D move with x and y. Conceptual On a graph showing the relationship between x and y, the ceteris paribus condition implies that A no other variables are related to x and y. B the value of x is held constant. C the value of y is held constant.
D other variables not shown are held constant. Analytical Assume that the quantity consumed of pizza is dependent on three factors: When graphing the relationship between the price of a pizza and the quantity of pizza consumed A the price of a pizza and the income of pizza consumers are the only variables that are allowed to change.
B the price of pizza and quantity consumed of pizza are the only variables that are allowed to change. B consumption expenditure would be lower at any level of labor income than depicted above.
C consumption expenditures would be the same at any level of labor income as that depicted above. D We cannot say how the function depicted above would be affected.
Conceptual In the above figure, A consumption expenditures are a linear function of labor income. B the slope of the function depicted is 0. C consumption expenditures are positively related to labor income. D All of the above answers are correct. D In the above figure, when income is zero, household expenditures equal A 0. Analytical In the above figure, the relationship between income and expenditures is A positive.
Analytical The relationship in the above figure suggests that when the interest rate is 5 percent, A a decrease in income will be associated with a decrease in expenditures. B a decrease in income will be associated with an increase in expenditures. C an increase in income will be associated with a decrease in expenditures. D there is no relationship between expenditures and income.
Analytical The slope of the line in the above figure is A —4. Analytical In the above figure, while moving along the line showing the relationship between household income and expenditure, A household expenditures are held constant. B household income is held constant.
C the interest rate is held constant. D no variable is held constant. Analytical In the above figure, if the interest rate is negatively related to household expenditures for any given level of household income, an increase in the interest rate will A shift the line vertically upward.
B shift the line vertically downward. C make the line negatively sloped. B Study Guide Questions Topic: In a time-series graph illustrating the total amount produced, you expect to find A an upward trend. Types of Graphs in Economics There are various kinds of graphs used in business and economics that illustrate data. These include pie charts segments are displayed as portions, usually percentages, of a circlescatter diagrams points are connected to establish a trendbar graphs results for each year can be displayed as an upward or downward barand cross section graphs segments of data can be displayed horizontally.
You will deal with some of these in economics, but you will be dealing principally with graphs of the following variety. Certain graphs display data on one variable over a certain period of time. For example, we may want to know how the inflation rate has varied in the Canadian economy from We would choose an appropriate scale for the rate of inflation on the y vertical axis; and on the x horizontal axis show the ten years from to with on the left, and on the right.
We would notice right away a trend. The trend in the inflation rate data is a decline, actually from a high of 5. We would see that there has been some increase in the inflation rate since its absolute low inbut not anything like the high. And, if we did such graphs for each of the decades in Canada sincewe would see that the s were a unique decade in terms of inflation. No decade, except the s, shows any resemblance to the s. We can then discuss the trends meaningfully, since we have ideas about the data over a major period of time.
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We can link the data with historical events such as government anti-inflation policies, and try to establish some connections. Other graphs are used to present a relationship between two variables, or in some instances, among more than two variables.
Consider the relationship between price of a good or service and quantity demanded. The two variables move in opposite directions, and therefore demonstrate a negative or indirect relationship.
Aggregate demand, the relationship between the total quantity of goods and services demanded in the entire economy, and the price level, also exhibits this inverse or negative relationship. If the price level based on the prices of a given base year rises, real GDP shrinks; while if the price level falls, real GDP increases.
Further, the supply curve for many goods and services exhibits a positive or direct relationship. The supply curve shows that when prices are high, producers or service providers are prepared to provide more goods or services to the market; and when prices are low, service providers and producers are interested in providing fewer goods or services to the market. The aggregate expenditure, or supply, curve for the entire Canadian economy the sum of consumption, investment, government expenditure and the calculation of exports minus imports also shows this positive or direct relationship.
Construction of a Graph You will at times be asked to construct a graph, most likely on tests and exams. You should always give close attention to creating an origin, the point 0, at which the axes start. Label the axes or number lines properly, so that the reader knows what you are trying to measure. Most of the graphs used in economics have, a horizontal number line or x-axis, with negative numbers on the left of the point of origin or 0, and positive numbers on the right of the origin.
Figure 2 presents a typical horizontal number line or x-axis. In economics graphs, you will also find a vertical number line or y-axis. Here numbers above the point of origin 0 will have a positive value; while numbers below 0 will have a negative value.
Figure 3 demonstrates a typical vertical number line or y-axis. When constructing a graph, be careful in developing your scale, the difference between the numbers on the axes, and the relative numbers on each axis. The scale needs to be graduated or drawn properly on both axes, meaning that the distance between units has to be identical on both, though the numbers represented on the lines may vary. You may want to use single digits, for example, on the y-axis, while using hundreds of billions on the x-axis.
Using a misleading scale by squeezing or stretching the scale unfairly, rather than creating identical distances for spaces along the axes, and using a successive series of numbers will create an erroneous impression of relationship for your reader.
If you are asked to construct graphs, and to show a knowledge of graphing by choosing variables yourself, choose carefully what you decide to study. Here is a good example of a difficulty to avoid.
Could you, for example, show a graphical relationship between good looks and high intelligence? I don't think so. First of all, you would have a tough time quantifying good looks though some social science researchers have tried!
Intelligence is even harder to quantify, especially given the possible cultural bias to most of our exams and tests. Finally, I doubt if you could ever find a connection between the two variables; there may not be any. Choose variables that are quantifiable. Height and weight, caloric intake and weight, weight and blood pressure, are excellent personal examples.
The supply and demand for oil in Canada, the Canadian interest rate and planned aggregate expenditure, and the Canadian inflation rate during the past forty years are all quantifiable economic variables.
You also need to understand how to plot sets of coordinate points on the plane of the graph in order to show relationships between two variables.
One set of coordinates specify a point on the plane of a graph which is the space above the x-axis, and to the right of the y-axis.
For example, when we put together the x and y axes with a common origin, we have a series of x,y values for any set of data which can be plotted by a line which connects the coordinate points all the x,y points on the plane. Such a point can be expressed inside brackets with x first and y second, or 10,1.
A set of such paired observation points on a line or curve which slopes from the lower left of the plane to the upper right would be a positive, direct relationship. A set of paired observation or coordinate points on a line that slopes from the upper left of the plane to the lower right is a negative or indirect relationship.
Working from a Table to a Graph Figures 5 and 6 present us with a table, or a list of related numbers, for two variables, the price of a T-shirt, and the quantity purchased per week in a store. Note the series of paired observation points I through N, which specify the quantity demanded x-axis, reflecting the second column of data in relation to the price y-axis, reflecting first column of data. See that by plotting each of the paired observation points I through N, and then connecting them with a line or curve, we have a downward sloping line from upper left of the plane to the lower right, a negative or inverse relationship.
We have now illustrated that as price declines, the number of T-shirts demanded or sought increases. Or, we could say reading from the bottom, as the price of T-shirts increases, the quantity demanded decreases. We have stated here, and illustrated graphically, the Law of Demand in economics. Now we can turn to the Law of Supply.
The positive relationship of supply is aptly illustrated in the table and graph of Figure 7. Note from the first two columns of the table that as the price of shoes increases, shoe producers are prepared to provide more and more goods to this market. The converse also applies, as the price that consumers are willing to pay for a pair of shoes declines, the less interested are shoe producers in providing shoes to this market.
The x,y points are specified as A through to E. When the five points are transferred to the graph, we have a curve that slopes from the lower left of the plane to the upper right. We have illustrated that supply involves a positive relationship between price and quantity supplied, and we have elaborated the Law of Supply.