Many of the concepts that economists study can be expressed with numbers—the price of bananas, the quantity of bananas sold, the cost of growing bananas, and SO on. Often, these economic variables are related to one another. When the price of bananas rises, people buy fewer bananas. One way of expressing the relationships among variables is with graphs.
Graphs serve two purposes. First, when developing economic theories, graphs offer a way to visually express ideas that might be less clear if described with equations or words. Second, when analyzing economic data, graphs provide a powerful way of finding and interpreting patterns. Whether we are working with theory or with data, graphs provide a lens through which a recognizable forest emerges from a multitude of trees.
Numerical information can be expressed graphically in many ways, just as there are many ways to express a thought in words. A good writer chooses words that will make an argument clear, a description pleasing, or a scene dramatic. An effective economist chooses the type of graph that best suits the purpose at hand.
In this appendix, we discuss how economists use graphs to study the mathematical relationships among variables. We also discuss some of the pitfalls that can arise in the use of graphical methods.
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