Cambridge IGCSE and O Level Economics Workbook Showing knowledge and understanding Knowledge and understanding of economic terms, concepts and topics is the first skill developed. It underpins analysis and evaluation. You cannot analyse or evaluate something until you know and understand it. You will not be familiar with some of the terms in economics but the more you use them, the more confident you will become Interpreting diagrams Diagrams have tobe considered carefully. Check o See whats being shown on the axes. The vertical axis isthe ine that runs up and down and is sometimes referred to asthe y axis. the al axis, aso called the x axis, runs from side to side. Then check whats plotted on the diagram. Figure 1 shows how many chocolate bars firms 2arewilling and able to sell at different prices. The line which plots the diferent quantities that ims will supply at different prices is known as a supply curve. The diagram shows that firms ‘are willing and able to supply more chocolate bars, the higher the price. Economic theory supports this relationship. This is because a higher price is likely to increase the revenue that the firm will receive. o Tomaontians Quant) Figure 1:A supply curve showing how many chocolate bars firms are willing and able to sell at different prices Drawing diagrams Diagrams are a key tool of an economist. They are used to analyse theories, predictions and relationships. The main types of diagrams you may be required to draw are a demand and supply diagram, a production possibility diagram, cost curve diagrams and revenue diagrams. Although aggregate demand and supply diagrams are nat on the syllabus, they can be used to explain, analyse and evaluate macroeconomic issues and policies When drawing a diagram, tis important that you: + usea ruler to draw the axes + label the axes clearly and accurately label the curves accurately make sure the diagram is large enough to be seen clearly + where appropriate, explain what the diagram shows,