Principles of Microeconomics / Unit 1 MIC 0031 worked example, 60 to 90 seconds
Reading a Straight Line
The idea
Most of this course's diagrams are straight lines, and two numbers describe one. Written as y equals b plus m x, b is the vertical intercept, the value of y when x is zero, and m is the slope, the rise divided by the run. A positive slope means the two variables move together; a negative slope means they move oppositely; a slope of zero is a flat line and no relationship. Changing b shifts the whole line up or down without tilting it. Changing m tilts it without moving the intercept.
In practice
Worked example: take y equals four plus two x. At x of zero, y is four. Raise x by one and y rises by two, so the slope is two. The line passes through zero and four, one and six, two and eight. Change the four to seven and every point rises by three with the tilt unchanged. Change the two to five and the line steepens while still starting at four.
Where people slip
Keep the two changes apart, because the whole course turns on the difference. A change in the intercept is a shift of the line; a change in the slope is a tilt. In every later unit a shift of a curve and a movement along it answer different questions, and confusing them is the most common error in reading an economic diagram.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Something wrong in this lesson? Flag it