Appendix
Working With Graphs and Formulas

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Learning Objectives

A1.1 Describe the four simple forms of data graphs.

A1.2 Make use of a straightforward approach to reading graphs.

A1.3 Read linear and nonlinear graphs and know how to compute their slopes.

A1.4 Use simple linear equations to describe a line and a shift of the line.

A1.5 Explain why correlation is not the same as causation.

You can’t watch the news on television or read a newspaper without seeing a graph of some sort. If you have flipped through this book, you have seen a large number of graphs, charts, and tables, and a few simple equations. This is the language of economics. Economists deal with data for all types of issues. Just looking at data in tables often doesn’t help you discern the trends or relationships in the data.

Economists develop theories and models to explain economic behavior and levels of economic activity. These theories or models are simplified representations of real-world activity. Models are designed to distill the most important relationships between variables, and then these relationships are used to predict future behavior of individuals, firms, and industries, or to predict the future course of the overall economy.

In this short section, we will explore the different types of graphs you are likely to see in this course (and in the media) and then turn to an examination of how graphs are used to develop and illustrate models. This second topic leads us into a discussion of modeling relationships between data and how to represent these relationships with simple graphs and equations.