DISCLAIMER: Every reasonable effort is made to ensure the accuracy of the information used in the creation of this reference

material, without
prejudice to the existing copyrights of the authors. As an offshoot of the innumerable difficulties encountered during these trying times, the authors
endeavored to ensure proper attribution of the esteemed original works, by way of footnotes or bibliography, to their best abilities and based on
available resources, despite the limited access and mobility due to quarantine restrictions imposed by the duly constituted authorities. We make no
warranties, guarantees or representations concerning the accuracy or suitability of the information contained in this material or any references and
links provided here. Links to other materials in our CPOD and CAM was made in good faith, for non-commercial teaching purposes only to the extent
justified for the purpose, and consistent with fair use under Sec. 185 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines.

PRELIM continuation…
#03 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

Knowing Graphs in Economics

Graph is a visual representation of the relationship between two variables.

50
Consumption price
400 40

300 30

200 20

100 10

0 100 200 300 400 0 4 8 12 16 20

Income quantity (in thousand)

Graph A Graph B
Income per week consumption per week Price Quantity
0 50 50 0
10 100 40 4
20 150 30 8
30 200 20 12
40 250 10 16
0 20

Graph A. shows that the direction of the arrow of the line goes up, means that consumption and income has
direct relationship (positive relationship) as income increases the consumption increases. Positively or directly
related variables has an upsloping line in graphs.
Graph B. shows the arrow of the line goes down, means that that there is an inverse relationship between the
two variables( price and quantity) as price decreases the quantity increases, moving in opposite directions. An
inverse relationship of variables is shown in graphs as a downsloping line.

Dependent Variable and Independent Variable

In mathematics, the independent variable is placed on the horizontal axis while dependent variable is placed
on the vertical axis.

Independent variable is the variable that changes first or the cause, while dependent variable is the effect or
the variable that changes because of the change in the independent variable just like in graph A, the income is
the independent variable while consumption is the dependent variable. The graphing of income and
consumption in graph A conforms with mathematical convention.
FOOTNOTES: Materials contained in the learning packets have been copied and conveyed to you by or on behalf of Pamantasan ng Cabuyao
pursuant to Section IV- The Copyright Act (RA) 8293 of the Philippines Intellectual Property Code. You are not allowed by the Pamantasan ng
Cabuyao to reproduce or convey these materials. The content may contain works which are protected by copyright under RA 8293. You may be liable
to copyright infringement for any copying and/or distribution of the content and the copyright owners have the right to take legal action against such
infringement. Do not remove this notice.
(3)
DISCLAIMER: Every reasonable effort is made to ensure the accuracy of the information used in the creation of this reference material, without
prejudice to the existing copyrights of the authors. As an offshoot of the innumerable difficulties encountered during these trying times, the authors
endeavored to ensure proper attribution of the esteemed original works, by way of footnotes or bibliography, to their best abilities and based on
available resources, despite the limited access and mobility due to quarantine restrictions imposed by the duly constituted authorities. We make no
warranties, guarantees or representations concerning the accuracy or suitability of the information contained in this material or any references and
links provided here. Links to other materials in our CPOD and CAM was made in good faith, for non-commercial teaching purposes only to the extent
justified for the purpose, and consistent with fair use under Sec. 185 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines.

PRELIM continuation…
#04 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

In Graph B, the independent variable is the price while the dependent variable is the quantity, however the
price(independent variable) is placed on the vertical axis while the quantity (dependent variable) is placed on
the horizontal axis. Economist put price and cost in the vertical axis, that means economist graphing of
independent and dependent variables is arbitrary. And also when economist plot two variables they employ
ceteris paribus assumption (other things remain constant or equal).

Slope of a Line

The slope of a straight Line is the ratio of the vertical change (rise or drop) to the horizontal change (the
run)between any two points of the line.
Example:
Positive Slope
Slope= vertical axis / horizontal axis = 5 / 10 = ½ = .5

.5 being positive means the two variables involved are directly related.

Negative slope
Slope + vertical axis / horizontal axis = -10 / 4 = -2 ½ = -2.5

-2.5 being negative means the two variables involved have an inverse relationship

Slope and marginals analysis

The concept of slope in economics is important since it shows marginal changes which involve 1 more (or 1
fewer) unit.

Infinite and Zero Slopes

Many variables have no relationship with one another.

Price
consumption

Purchases couples’ legal separation rate

Graph A Graph B

Graph A. purchase remain the same or constant whatever be the price.

Graph B. consumptions remain the same whatever happen to the couple’s legal separation rate.
The two variables in Graphs A are unrelated or has no relationship with each other, which is also true in graph
B.

FOOTNOTES: Materials contained in the learning packets have been copied and conveyed to you by or on behalf of Pamantasan ng Cabuyao
pursuant to Section IV- The Copyright Act (RA) 8293 of the Philippines Intellectual Property Code. You are not allowed by the Pamantasan ng
Cabuyao to reproduce or convey these materials. The content may contain works which are protected by copyright under RA 8293. You may be liable
to copyright infringement for any copying and/or distribution of the content and the copyright owners have the right to take legal action against such
infringement. Do not remove this notice.
(4)
DISCLAIMER: Every reasonable effort is made to ensure the accuracy of the information used in the creation of this reference material, without
prejudice to the existing copyrights of the authors. As an offshoot of the innumerable difficulties encountered during these trying times, the authors
endeavored to ensure proper attribution of the esteemed original works, by way of footnotes or bibliography, to their best abilities and based on
available resources, despite the limited access and mobility due to quarantine restrictions imposed by the duly constituted authorities. We make no
warranties, guarantees or representations concerning the accuracy or suitability of the information contained in this material or any references and
links provided here. Links to other materials in our CPOD and CAM was made in good faith, for non-commercial teaching purposes only to the extent
justified for the purpose, and consistent with fair use under Sec. 185 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines.

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”.
FOOTNOTES: Materials contained in the learning packets have been copied and conveyed to you by or on behalf of Pamantasan ng Cabuyao
pursuant to Section IV- The Copyright Act (RA) 8293 of the Philippines Intellectual Property Code. You are not allowed by the Pamantasan ng
Cabuyao to reproduce or convey these materials. The content may contain works which are protected by copyright under RA 8293. You may be liable
to copyright infringement for any copying and/or distribution of the content and the copyright owners have the right to take legal action against such
infringement. Do not remove this notice.
(5)