Appendix Study Questions

1. Briefly explain the use of graphs as a way to represent economic relationships. What is an inverse relationship? How does it graph? What is a direct relationship? How does it graph? Graph and explain the relationships you would expect to find between (a) the number of centimetres of rainfall per month and the sale of umbrellas, (b) the amount of tuition and the level of enrolment at a college or university, and (c) the popularity of a music artist and the price of her concert tickets.

In each case cite and explain how variables other than those specifically mentioned might upset the expected relationship. Is your graph in part b, above, consistent with the fact that, historically, enrolments and tuition have both increased? If not, explain any difference.

2. KEY APPENDIX QUESTION Indicate how each of the following might affect the data shown in Table A1-2 and Figure A1-2 of this appendix:

a. IU's athletic director schedules higher-quality opponents.

b. An NBA team locates in the city where IU also plays.

c. IU contracts to have all its home games televised.

3. KEY APPENDIX QUESTION The following table contains data on the relationship between saving and income. Rearrange these data into a meaningful order and graph them on the accompanying grid. What is the slope of the line? The vertical intercept? Interpret the meaning of both the slope and the intercept. Write the equation that represents this line. What would you predict saving to be at the $12,500 level of income?

Income (per year)

Saving (per year)

$15,000

$1,000

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