PRELIM continuation…

#05 Lecture notes: (for lectures and discussions only)

Book references and suggested readings:
A. Economics. Campbell R. McConnel, Stanley C. Rue, Sean M. Flynn, and Randy Grant
Global Edition, New York, U.S.A., McGrowHill/Irwin, 2012
B. Economics 19th Edition by Paul A. Samuelson and William D. Nordhaus
Copright 2010, 2005,2001 by McGraw Hill Companies, Inc.
C. Economics for Consumer, Bernardo Villegas
4th Edition, 1983 Sinag-Tala Publishers, Inc., Manila, Philippines

Vertical Intercept
Without plotting, the location of line in the graph can be determined if we know the slope and vertical intercept of a line (the
point where the line meets the vertical axis).

Linear equation 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

For graph A
Solving for the dependent variable y, which is consumption, with a given level of income at 250, vertical intercept of 50 and
a slope of .5
Consumption = 50 + .5(250) = 50 +125= 175

In the case of graph B, when economist reverse the mathematical convention by placing the independent variable on the
vertical axis and dependent variable on the horizontal axis, y then stands for the independent variable rather than
dependent variable in the general form.
Solving for the dependent variable x, which is quantity, with a given price of 15, a 50 vertical intercept, and a slope of -2.5:

15 = 50 -2.5(x) = 14

Slope of a nonlinear curve

20 line A

15
Point a
10
Line B
5
Point b

0 5 10 15 20

To get the slope, we draw straight line tangent to the curve at that point. A straight line is tangent if it touches but does not
intersect the curve at that point. For line A the drop is -20 and the run is +5, so -20/5= -4 is the slope of the line and the
slope of point a, for line B the drop is -5 and the run is 15, so -5/15 = -1/3 is the slope of the line and the slope of point b.

In linear relationship (straight line), it is customary to acknowledge straight lines in graphs as “curves”.

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