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Key Terms/Tasks • • • • • • 1. 2. 3. 4. 5. 6. Plotting coordinates Vertical intercept Horizontal intercept Slope Ceteris paribus: how relates Tangency Demand for Concert Tickets Point on Curve a Ticket Price Ticket Demand $250 0 b $200 40 c $150 80 d $100 120 e $50 160 f $0 200 Relate to Demand Theory • Ceteris Paribus Assumption: “Other Things Equal” means that the graph is just two-dimensional and everything ELSE related to quantity demanded OTHER than price is held constant. • If ceteris paribus factors change, must draw entirely new line. • Negative relationship between quantity demanded and price—Line slopes down. Comes from Law of Demand. Further Details • For folks with math background: with this graph, economists put the independent variable (price) on the vertical axis and the dependent variable (quantity demanded) on the horizontal axis. This is opposite to what is done in math. • The shape of the demand curve is the SLOPE. Since the curve is downward-sloping, we say the slope is negative. Calculating Slope • Calculate slope as movement from one point to another. • Slope = rise/run • Slope = (P) / (Qd) • Using previous graph drawn: • Slope = (200-150)/(40-80)= • 50/-40 = 5/-4 = -1.25. Intercepts • Intercepts are where the line hits the vertical and horizontal axis. • Vertical intercept: answers question—what is price when Qd=0? Can show on graph and see in table. • Horizontal intercept: answers question—what is Qd when P=0? Can show on graph and see in table. Measuring Slope of Nonlinear Curve • Slope of a nonlinear curve is NOT a constant, so slope will be different at each different point along the curve. • Measure slope at a particular point by first drawing a line tangent to the curve at that point, and then calculating the slope of that tangent line. • Note that tangent means touches at one point. Slope of Nonlinear Curve In-Class Exercise POINT Video Price Video Qd a $60 0 b 50 3 c 40 6 d 30 9 e 20 12 f 10 15 g 0 18 Tasks to Complete • • • • Draw graph Describe relationship Calculate slope Identify both intercepts