Economics Global Edition 10th Edition

Parkin Solutions Manual

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Economics Global Edition 10th Edition Parkin Solutions Manual

Appendix
1 GRAPHS IN
ECONOMICS

Answers to the Review Quiz

Page 26
1. Explain how we “read” the three graphs in Figs A1.1 and A1.2.
The points in the graphs relate the quantity of the variable measured on the one axis to the quantity of
the variable measured on the other axis. The quantity of the variable measured on the horizontal axis
(the x-axis) is measured by the horizontal distance from the origin to the point. Similarly, the quantity
of the variable measured on the vertical axis (the y-axis) is measured by the vertical distance from the
origin to the point. The point relates these two quantities. For instance, in Figure A1.2a, point A shows
that at a price of 99 cents per song, 8.3 million songs are downloaded.
2. Explain what scatter diagrams show and why we use them.
Scatter diagrams plot the value of one economic variable against the value of another variable for a
number of different values of each variable. We use scatter diagrams because they quickly reveal if a
relationship exists between the two variables. Moreover, if a relationship exists, scatter diagrams show
whether increases in one variable are associated with increases or decreases in the other variable.
3. Explain how we “read” the three scatter diagrams in Figs A1.3 and A1.4.
The scatter diagram in Figure A1.3 shows the relationship between box office ticket sales and DVDs
sold for 8 popular movies. The figure shows that higher box office sales are associated with a higher
number of DVDs sold. But the figure shows that the relationship is weak because the points tend to be
widespread.
The scatter diagram in Figure A1.4a shows the relationship between income, in thousands of dollars
per year, and expenditure, also in thousands of dollars per year, for the years 2000 to 2009. The scatter
diagram shows that higher income leads to higher expenditure. The figure also shows that the
relationship is relatively strong because the points tend to be narrowly clustered along the positive
relationship.
The scatter diagram in Figure A1.4b shows the relationship between the inflation rate and the
unemployment rate for the years 2000 to 2009. The figure shows that for most of the years, there was
no relationship between these variables, although in 2009 the high unemployment rate brought a low
inflation rate.

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10 APPENDIX 1

4. Draw a graph to show the relationship between two variables that move in the same
direction.
A graph that shows the relationship between two
variables that move in the same direction is shown
by a line that slopes upward. Figure A1.1
illustrates such a relationship.

5. Draw a graph to show the relationship between two variables that move in opposite
directions.
A graph that shows the relationship between two
variables that move in the opposite directions is
shown by a line that slopes downward. Figure
A1.2 illustrates such a relationship.

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 GRAPHS IN ECONOMICS 11

6. Draw a graph to show the relationship between two variables that have a maximum and
a minimum.
A graph that shows the relationship between
two variables that have a maximum is
shown by a line that starts out sloping
upward, reaches a maximum, and then
slopes downward. Figure A1.3 illustrates
such a relationship with curve B.
A graph that shows the relationship between
two variables that have a minimum is shown
by a line that starts out sloping downward,
reaches a minimum, and then slopes
upward. Figure A1.3 illustrates such a
relationship with curve A.
7. Which of the relationships in Questions
4 and 5 is a positive relationship and
which is a negative relationship?
The relationship in Question 4 between the
two variables that move in the same
direction is a positive relationship. The
relationship in Question 5 between the two variables that move in the opposite directions is a negative
relationship.
8. What are the two ways of calculating the slope of a curved line?
To calculate the slope of a curved line we can calculate the slope at a point or across an arc.
The slope of a curved line at a point on the line is defined as the slope of the straight line tangent to the
curved line at that point. The slope of a curved line across an arc—between two points on the curved
line—equals the slope of the straight line between the two points.
9. How do we graph a relationship among more than two variables?
To graph a relationship among more than two variables, hold constant the values of all the variables
except two. Then plot the value of one of the variables against the other variable.
10. Explain what change will bring a movement along a curve.
A movement along a curve occurs when the value of a variable on one of the axes changes while all of
the other relevant variables not graphed on the axes do not change. The movement along the curve
shows the effect of the variable that changes, ceteris paribus (holding all of the other non-graphed
variables constant).
11. Explain what change will bring a shift of a curve.
A curve shifts when there is a change in the value of a relevant variable that is not graphed on the axes.
In this case the entire curve shifts.

© 2012 Pearson Education, Inc. Publishing as Addison Wesley

12 APPENDIX 1

Answers to the Study Plan Problems and Applications

Use the spreadsheet to work Problems
A B C D E
1 to 3. The spreadsheet provides data
1 1999 2.2 4.6 4.8 4.2
on the U.S. economy: Column A is the
2 2000 3.4 5.8 4.1 4.0
year, column B is the inflation rate,
3 2001 2.8 3.4 1.1 4.7
column C is the interest rate, column D
is the growth rate, and column E is the 4 2002 1.6 1.6 1.8 5.8
unemployment rate. 5 2003 2.3 1.0 2.5 6.0
6 2004 2.7 1.4 3.6 5.5
7 2005 3.4 3.2 3.1 5.1
8 2006 3.2 4.7 2.7 4.6
9 2007 2.8 4.4 2.1 4.6
10 2008 3.8 1.4 0.4 5.8
11 2009 −0.4 0.2 −2.4 9.3

1. Draw a scatter diagram of the inflation rate and the interest rate. Describe the
relationship.
To make a scatter diagram of the inflation rate and the interest rate, plot the inflation rate on the x-axis
and the interest rate on the y-axis. The graph will be a set of dots and is shown in Figure A1.4. The
pattern made by the dots tells us that as the inflation rate increases, the interest rate usually increases so
there is a positive relationship.
2. Draw a scatter diagram of the growth rate and the unemployment rate. Describe the
relationship.
To make a scatter diagram of the growth rate and the unemployment rate, plot the growth rate on the x-
axis and the unemployment rate on the y-axis. The graph will be a set of dots and is shown in Figure
A1.5. The pattern made by the dots tells us that when the growth rate increases, the unemployment rate
usually decreases so there is a negative relationship.

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 GRAPHS IN ECONOMICS 13

3. Draw a scatter diagram of the interest rate and the unemployment rate. Describe the
relationship.
To make a scatter diagram of the interest rate
and the unemployment rate, plot the interest rate
on the x-axis and the unemployment rate on the
y-axis. The graph will be a set of dots and is
shown in Figure A1.6. The pattern made by the
dots tells us that when the interest rate increases,
the unemployment rate usually decreases so
there is a negative relationship.

Use the following news clip to work Problems 4 to

6.
Clash of the Titans Tops Box Office With Sales of $61.2 Million:
Source: Bloomberg.com, April 5, 2010 Theaters Revenue
4. Draw a graph of the relationship Movie (number) (dollars per theater)
between the revenue per Clash of the Titans 3,777 16,213
theater on the y-axis and the Tyler Perry’s Why 2,155 13,591
number of theaters on the x- Did I Get Married
axis. Describe the relationship. How To Train Your 4,060 7,145
Figure A1.7 shows the relationship. Dragon
As the figure shows, there is The Last Song 2,673 5,989
perhaps a positive relationship. But
this relationship is extremely inconsistent. In
particular, the second largest revenue per theater
occurred in the smallest number of theaters while
the largest revenue per theater occurred in the
second largest number of theaters.
5. Calculate the slope of the relationship
between 4,060 and 2,673 theaters.
The slope equals the change in revenue per
theater divided by the change in the number of
theaters. The slope equals ($7,145 
$5,989)/(4,060  2,673) which equals $0.83 per
theater.
6. Calculate the slope of the relationship
between 2,155 and 4,060 theaters.
The slope equals the change in revenue per
theater divided by the change in the number of

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14 APPENDIX 1

theaters. The slope equals ($13,591  $7,145)/(2,155  4,060) which equals −$3.38 per theater.
7. Calculate the slope of the relationship
shown in Figure A1.8.
The slope is 5/4. The curve is a straight line,
so its slope is the same at all points on the
curve. Slope equals the change in the variable
on the y-axis divided by the change in the
variable on the x-axis. To calculate the slope,
you must select two points on the line. One
point is at 10 on the y-axis and 0 on the x-axis,
and another is at 8 on the x-axis and 0 on the y-
axis. The change in y from 10 to 0 is associated
with the change in x from 0 to 8. Therefore the
slope of the curve equals 10/8, which equals
5/4.

Use the relationship shown in Figure A1.9 to work Problems 8 and 9.

8. Calculate the slope of the relationship at
point A and at point B.
The slope at point A is 2, and the slope at
point B is 0.25. To calculate the slope at a
point on a curved line, draw the tangent to the
curved line at the point. Then find a second
point on the tangent and calculate the slope of
the tangent.
The tangent at point A cuts the y-axis at 10. The
slope of the tangent equals the change in y
divided by the change in x. The change in y
equals 4 (6 minus 10) and the change in x
equals 2 (2 minus 0). The slope at point A is
4/2, which equals 2.
Similarly, the slope at point B is 0.25. The
tangent at point B goes through the point (4, 2).
The change in y equals 0.5, and the change in x
equals 2. The slope at point B is 0.25.
9. Calculate the slope across the arc AB.
The slope across the arc AB is 1.125. The slope across an arc AB equals the change in y, which is 4.5
(6.0 minus 1.5) divided by the change in x, which equals 4 (2 minus 6). The slope across the arc AB
equals 4.5/4, which is 1.125.

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 GRAPHS IN ECONOMICS 15

Use the table to work Problems 10 and 11.

The table gives the price of a balloon ride, Price Balloon rides
the temperature, and the number of rides a (dollars (number per day)
day. per ride) 50F 70F 90F
10. Draw a graph to show the relationship 5.00 32 40 50
between the price and the number of 10.00 27 32 40
rides, when temperature is 70°F. 15.00 18 27 32
Describe this relationship.
Figure A1.10 shows the relationship between the
price and the number of balloon rides when the
temperature is 70F. The relationship between
the price and the number of rides is inverse; that
is, when the price rises, the number of rides
decreases.

11. What happens in the graph in Problem 10

if the temperature rises to 90°F?
If the temperature rises to 90F, the curve shifts
rightward. This shift is illustrated in Figure
A1.11. In that figure, both the initial curve,
which applies when the temperature is 70F, and
the new curve, which applies when the
temperature is 90F, are illustrated. The curve
when the temperature is 90F lies to the right of
the curve when the temperature is 70F
indicating that at every price, more balloon rides
are taken when the temperature is 90F rather
than 70F.

© 2012 Pearson Education, Inc. Publishing as Addison Wesley

16 APPENDIX 1

Answers to the Instructor Assignable Problems and Applications

Use the spreadsheet to work Problems
A B C D E
12 to 14. The spreadsheet provides
1 1999 24 118 5.9 8.1
data on oil and gasoline: Column A is
2 2000 30 152 5.8 8.2
the year, column B is the price of oil
(dollars per barrel), column C is the 3 2001 17 146 5.8 8.3
price of gasoline (cents per gallon), 4 2002 24 139 5.7 8.4
column D is U.S. oil production, and 5 2003 27 160 5.7 8.5
column E is the U.S. quantity of 6 2004 37 190 5.4 8.7
gasoline refined (both in millions of 7 2005 49 231 5.2 8.7
barrels per day). 8 2006 56 262 5.1 8.9
9 2007 86 284 5.1 9.0
10 2008 43 330 5.0 8.9
11 2009 76 241 4.9 8.9

12. Draw a scatter diagram of the price of oil and the quantity of U.S. oil produced.
Describe the relationship.
Figure A1.12 shows the scatter diagram between the price of a barrel of oil and the quantity of U.S. oil
produced. It shows a negative relationship.
13. Draw a scatter diagram of the price of gasoline and the quantity of gasoline refined.
Describe the relationship.
Figure A1.13 shows the scatter diagram between the price of a gallon of gasoline and the quantity of
gasoline refined. It shows a positive relationship.

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 GRAPHS IN ECONOMICS 17

14. Draw a scatter diagram of the quantity of U.S. oil produced and the quantity of gasoline
refined. Describe the relationship.
Figure A1.14 shows the scatter diagram between
the quantity of U.S. oil produced and the quantity
of gasoline refined. It shows a negative
relationship.

Use the following data to work Problems 15 to 17.

Draw a graph that shows the relationship
between the two variables x and y in the x 0 1 2 3 4 5
table to the right. y 25 24 22 18 12 0
To make a graph that shows the relationship
between x and y, plot the x variable on the x-axis
and the y variable on the y-axis. Figure A1.15
shows this graph.
15. a. Is the relationship positive or negative?
The relationship is negative because x and y move
in opposite directions: As x increases, y decreases.
b. Does the slope of the relationship increase
or decrease as the value of x increases?
The slope becomes steeper as x increases, so the
absolute value of the slope increases as x
increases. (The slope itself decreases as x
increases because it becomes more negative.)
Slope is equal to the change in y divided by the
change in x as we move along the curve. When x
increases from 1 to 2 (a change of 1), y decreases
from 24 to 22 (a change of 2), so the slope is 2.
But when x increases from 4 to 5 (a change of 1), y
decreases from 8 to 0 (a change of 8), so the
slope is 8.
c. Think of some economic relationships that might be similar to this one.
The less expensive a good, the greater is the number of people who buy it. The higher the interest rate,
the smaller is the number of people who take out home mortgages. The less expensive gasoline, the
greater the miles car owners drive.

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18 APPENDIX 1

16. Calculate the slope of the relationship between x and y when x equals 3.
The slope equals 5. The slope of the curve at the point where x is 3 is equal to the slope of the tangent
to the curve at that point. Plot the relationship and then draw the tangent line at the point where x is 3
and y is 18. Now calculate the slope of this tangent line by finding another point on the tangent. When
x equals 5, y equals 10 on the tangent, so another point is x equals 5 and y equals 10. The slope equals
the change in x, 8, divided by the change in y, 2, so the slope is 4.
17. Calculate the slope of the relationship across the arc as x increases from 4 to 5.
The slope is –12. The slope of the relationship across the arc when x increases from 4 to 5 is equal to
the slope of the straight line joining the points on the curve at x equals 4 and x equals 5. When x
increases from 4 to 5, y falls from 12 to 0. The slope equals the change in x, 12 (0 minus 12), divided
by the change in y, 1 (5 minus 4), so the slope across the arc is 12.
18. Calculate the slope of the relationship shown
at point A in figure A1.16.
The slope is 2. The curve is a straight line, so its
slope is the same at all points on the curve. Slope
equals the change in the variable on the y-axis
divided by the change in the variable on the x-axis.
To calculate the slope, select two points on the
line. One point is at 18 on the y-axis and 0 on the
x-axis, and another is at 9 on the x-axis and 0 on
the y-axis. The change in y from 18 to 0 is
associated with the change in x from 0 to 9.
Therefore the slope of the curve equals 18/9,
which equals 2.

Use Figure A1.17to work Problems 19 and 20.

19. Calculate the slope at point A and at point B.
The slope at point A is 4, and the slope at point B
is 1. To calculate the slope at a point on a curved
line, draw the tangent to the line at the point. Then
find a second point on the tangent and calculate
the slope of the tangent.
The tangent at point A cuts the x-axis at 2.5. The
slope of the tangent equals the change in y divided
by the change in x. The change in y equals 6 (6
minus 0) and the change in x equals 1.5 (1 minus
2.5). The slope at point A is 6/1.5, which equals
4. Similarly, the slope at point B is 1. The
tangent at point B cuts the y-axis at 5. The change
in y equals 3, and the change in x equals 3. The
slope at point B is 1.
20 Calculate the slope across the arc AB.
The slope across the arc AB is 2. The slope

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 GRAPHS IN ECONOMICS 19

across the arc AB equals the change in y, which is 4 (6 minus 2) divided by the change in x, which
equals 2 (1 minus 3). The slope across the arc AB equals 4/2, which equals 2.
Use the following table to work Problems 21 to 23.
The table gives information about
umbrellas: price, the number purchased, Umbrellas
and rainfall in inches. Price (numbers per day)
21. Draw a graph to show the relationship (dollars 0 1 2
between the price and the number of per (inches of rainfall)
umbrellas purchased, holding the umbrella)
amount of rainfall constant at 1 inch. 20 4 7 8
Describe this relationship. 30 2 4 7
Figure A1.18 shows the relationship. To 40 1 2 4
draw a graph of the relationship between
the price and the number of umbrellas when the
rainfall equals 1 inch, keep the rainfall at 1 inch
and plot the data in that column against the price.
This curve is the relationship between price and
number of umbrellas when the rainfall is 1 inches.
The relationship between the price and the number
of umbrellas is an inverse relationship; as the price
rises, the number of umbrellas decreases.
22. What happens in the graph in Problem 21 if
the price rises and rainfall is constant?
If the price rises, the number of umbrellas
decreases. In Figure A1.18, there is a movement
upward along the (unchanged) curve.

23. What happens in the graph in Problem 21 if

the rainfall increases from 1 inch to 2
inches?
As shown in Figure A1.19, the curve shifts
rightward. In that figure, both the initial curve,
which applies when the rainfall is 1 inch, and the
new curve, which applies when the rainfall is 2
inches, are illustrated. The curve when the rainfall
is 2 inches lies to the right of the curve when the
rainfall is 1 inch indicating that at every price,
more umbrellas are purchased when the rainfall is
2 inches than when the rainfall is 1 inch.

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Economics Global Edition 10th Edition Parkin Solutions Manual

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