The main goals of this chapter are to: Apply production possibilities analysis, increasing opportunity costs, and economic growth; explain how economic growth and international trade increase consumption possibilities; understand graphs, curves, and slopes as they relate to economics. | 01 Limits, Alternatives, and Choices Appendix McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Construction of a Graph LO7 Table Graph Income Consumption Point $ 0 100 200 300 400 $ 50 100 150 200 250 a b c d e Consumption (C) Income (Y) $100 200 300 400 a b c d e $400 300 200 100 0 1App- Direct and Inverse Relationships LO7 Direct relationship Both variables move up or down together 1App- Direct and Inverse Relationships Inverse relationship LO7 Variables move opposite of each other 1App- Slope of a Line LO7 Consumption (C) Income (Y) $100 200 300 400 $400 300 200 100 0 Positive slope of a straight line Slope = Vertical Change Horizontal Change +50 +100 = = = 1 2 50 100 Vertical Change Horizontal Change 1App- Slope of a Line LO7 Ticket Price Attendance (thousands) $50 0 40 4 30 8 20 12 10 16 0 20 1App- Slope of a Line Negative slope of a straight line LO7 Slope = Vertical Change Horizontal Change = -10 +4 = 1 2 -2 50 4030 20 10 4 8 12 16 20 -10 4 Horizontal Change Vertical Change Ticket Price $ Attendance = 1App- LO7 Slope of a Line Slopes and measurement units Slopes and marginal analysis Infinite and zero slopes 1App- LO7 Price of Bananas Consumption Watch Purchases Divorce Rate Slope = Infinite Slope = Zero Slope of a Line 1App- LO7 Equation of a Linear Relationship y = a + bx y is the dependent variable a is the vertical intercept b is the slope of the line x is the independent variable 1App- Equation of a Line LO7 Consumption (C) Income (Y) $100 200 300 400 $400 300 200 100 0 Y = 50 + .5C 1App- Equation of a Line P = 50 – LO7 50 4030 20 10 4 8 12 16 20 Ticket Price Attendance 1App- LO7 Slope of a Nonlinear Curve Slope always changes Must use a line tangent to the curve to find the slope at that point 1App- Slope of a Nonlinear Curve LO7 20 15 10 5 0 5 10 15 20 Use tangent lines to find the slope 1App- | 01 Limits, Alternatives, and Choices Appendix McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Construction of a Graph LO7 Table Graph Income Consumption Point $ 0 100 200 300 400 $ 50 100 150 200 250 a b c d e Consumption (C) Income (Y) $100 200 300 400 a b c d e $400 300 200 100 0 1App- Direct and Inverse Relationships LO7 Direct relationship Both variables move up or down together 1App- Direct and Inverse Relationships Inverse relationship LO7 Variables move opposite of each other 1App- Slope of a Line LO7 Consumption (C) Income (Y) $100 200 300 400 $400 300 200 100 0 Positive slope of a straight line Slope = Vertical Change Horizontal Change +50 +100 = = = 1 2 50 100 Vertical Change Horizontal Change 1App- Slope of a Line LO7 Ticket Price Attendance (thousands) $50 0 40 4 30 8 20 12 10 16 0 20 1App- Slope of a Line Negative slope of a straight line LO7 Slope = Vertical Change Horizontal Change =
