Direct and inverse relationship in economics

What is the difference between a direct and an inverse economic relationship ? | Yahoo Answers

direct and inverse relationship in economics

Learn about direct and inverse relationships in terms of graphing, writing equations, and determining relationships from data. You will also see. A direct relationship between two variables means that they move in the same direction. It one increases the other increases. If one decreases. Maybe you want to know how to tell when a situation can be considered an example of a direct or an inverse relationship. When both amounts you consider .

Pi is always the same, so if you double the value of D, the value of C doubles too. The gradient of the graph tells you the value of the constant.

Variation, Direct and Inverse

Inverse Relationships Inverse relationships work differently. If you increase x, the value of y decreases. For example, if you move more quickly to your destination, your journey time will decrease. In this example, x is your speed and y is the journey time. Doubling your speed halves the journey time, and increasing the speed by ten times makes the journey time ten times shorter. Mathematically, this type of relationship has the form: As you start to increase x, y decreases really quickly, but as you continue increasing x the rate of decrease of y gets slower.

direct and inverse relationship in economics

In this case, y is inversely related to x. At first an increase of 3 in x decreases y by 2, but then an increase of 6 in x only decreases y by 1. This is why inverse relationships are declining curves that get shallower the further you move along them.

What Is the Difference Between a Direct and an Inverse Relationship? | Sciencing

The Difference In direct relationships, an increase in x leads to a correspondingly sized increase in y, and a decrease has the opposite effect. This makes a straight-line graph. In inverse relationships, increasing x leads to a corresponding decrease in y, and a decrease in x leads to an increase in y.

This makes a curving graph where the decline is rapid at first but gets slower for larger values of x.

direct and inverse relationship in economics

In economics graphs, you will also find a vertical number line or y-axis. Here numbers above the point of origin 0 will have a positive value; while numbers below 0 will have a negative value. Figure 3 demonstrates a typical vertical number line or y-axis.

When constructing a graph, be careful in developing your scale, the difference between the numbers on the axes, and the relative numbers on each axis.

direct and inverse relationship in economics

The scale needs to be graduated or drawn properly on both axes, meaning that the distance between units has to be identical on both, though the numbers represented on the lines may vary. You may want to use single digits, for example, on the y-axis, while using hundreds of billions on the x-axis.

Using a misleading scale by squeezing or stretching the scale unfairly, rather than creating identical distances for spaces along the axes, and using a successive series of numbers will create an erroneous impression of relationship for your reader.

If you are asked to construct graphs, and to show a knowledge of graphing by choosing variables yourself, choose carefully what you decide to study. Here is a good example of a difficulty to avoid. Could you, for example, show a graphical relationship between good looks and high intelligence? I don't think so. First of all, you would have a tough time quantifying good looks though some social science researchers have tried!

Intelligence is even harder to quantify, especially given the possible cultural bias to most of our exams and tests. Finally, I doubt if you could ever find a connection between the two variables; there may not be any. Choose variables that are quantifiable. Height and weight, caloric intake and weight, weight and blood pressure, are excellent personal examples.

The supply and demand for oil in Canada, the Canadian interest rate and planned aggregate expenditure, and the Canadian inflation rate during the past forty years are all quantifiable economic variables.

direct and inverse relationship in economics

You also need to understand how to plot sets of coordinate points on the plane of the graph in order to show relationships between two variables. One set of coordinates specify a point on the plane of a graph which is the space above the x-axis, and to the right of the y-axis. For example, when we put together the x and y axes with a common origin, we have a series of x,y values for any set of data which can be plotted by a line which connects the coordinate points all the x,y points on the plane.

Such a point can be expressed inside brackets with x first and y second, or 10,1. A set of such paired observation points on a line or curve which slopes from the lower left of the plane to the upper right would be a positive, direct relationship. A set of paired observation or coordinate points on a line that slopes from the upper left of the plane to the lower right is a negative or indirect relationship. Working from a Table to a Graph Figures 5 and 6 present us with a table, or a list of related numbers, for two variables, the price of a T-shirt, and the quantity purchased per week in a store.

Note the series of paired observation points I through N, which specify the quantity demanded x-axis, reflecting the second column of data in relation to the price y-axis, reflecting first column of data. See that by plotting each of the paired observation points I through N, and then connecting them with a line or curve, we have a downward sloping line from upper left of the plane to the lower right, a negative or inverse relationship.

We have now illustrated that as price declines, the number of T-shirts demanded or sought increases. Or, we could say reading from the bottom, as the price of T-shirts increases, the quantity demanded decreases. We have stated here, and illustrated graphically, the Law of Demand in economics. Now we can turn to the Law of Supply. The positive relationship of supply is aptly illustrated in the table and graph of Figure 7. Note from the first two columns of the table that as the price of shoes increases, shoe producers are prepared to provide more and more goods to this market.

The converse also applies, as the price that consumers are willing to pay for a pair of shoes declines, the less interested are shoe producers in providing shoes to this market. The x,y points are specified as A through to E. When the five points are transferred to the graph, we have a curve that slopes from the lower left of the plane to the upper right. We have illustrated that supply involves a positive relationship between price and quantity supplied, and we have elaborated the Law of Supply.

Now, you should have a good grasp of the fundamental graphing operations necessary to understand the basics of microeconomics, and certain topics in macroeconomics. Many other macroeconomics variables can be expressed in graph form such as the price level and real GDP demanded, average wage rates and real GDP, inflation rates and real GDP, and the price of oil and the demand for, or supply of, the product.

Don't worry if at first you don't understand a graph when you look at it in your text; some involve more complicated relationships. You will understand a relationship more fully when you study the tabular data that often accompanies the graph as shown in Figures 5 and 7or the material in which the author elaborates on the variables and relationships being studied. Gentle Slopes When you have been out running or jogging, have you ever tried, at your starting pace, to run up a steep hill?

If so, you will have a good intuitive grasp of the meaning of a slope of a line. You probably noticed your lungs starting to work much harder to provide you with extra oxygen for the blood. If you stopped to take your pulse, you would have found that your heart is pumping blood far faster through the body, probably at least twice as fast as your regular, resting rate.

What is the difference between a direct and an inverse economic relationship ?

The greater the steepness of the slope, the greater the sensitivity and reaction of your body's heart and lungs to the extra work. Slope has a lot to do with the sensitivity of variables to each other, since slope measures the response of one variable when there is a change in the other.

The slope of a line is measured by units of rise on the vertical y-axis over units of run on the horizontal x-axis. A typical slope calculation is needed if you want to measure the reaction of consumers or producers to a change in the price of a product. For example, let's look at what happens in Figure 7 when we move from points E to D, and then from points B to A.

The run or horizontal movement is 80, calculated from the difference between and 80, which is Let's look at the change between B and A. The vertical difference is again 20 - 80while the horizontal difference is 80 - We can generalize to say that where the curve is a straight line, the slope will be a constant at all points on the curve.

Figure 8 shows that where right-angled triangles are drawn to the curve, the slopes are all constant, and positive. Now, let's take a look at Figure 9, which shows the curve of a negative relationship. All slopes in a negative relationship have a negative value. We can generalize to say that for negative relationships, increases in one variable are associated with decreases in the other, and slope calculations will, therefore, be of a negative value.

A final word on non-linear slopes. Not all positive nor negative curves are straight lines, and some curves are parabolic, that is, they take the shape of a U or an inverted U, as is demonstrated in Figure 10, shown below. To the left of point C, called the maxima, slopes are positive, and, to the right of point C, they are negative. You can determine the slope of a parabola by drawing a tangent touches at a single point line to any point on the curve.

You can see below that a point such as R is then selected on the line, and a right angled triangle can be constructed which joins points R and B.