Economics

Basic tools for economic analysis: Graphs explained with its characteristics and importance

len Alfred Ajibola - 11th May, 2023 @ 10:57 AM

Topics in Economics

Types of capital market: Primary market and secondary market Capital market explained with its functions Basic tools for economic analysis: Graphs explained with its characteristics and importance Basic tools for economic analysis: Tables explained with its characteristics and importance Factors affecting population in economics Advantages of Inflation Disadvantages of Inflation Concept of Inflation in Economics Scheme of work for Economics, SS1, First Term Scheme of work for Economics, SS1, Second Term Scheme of Work for Economics, SS1, Third Term Functions of the Wholesaler Advantages and Disadvantages of the Wholesaler Wholesale Market: Who is a Wholesaler? Characteristics of the Wholesaler Retail Market: Who is a Retailer and Examples of Retailers Market: Types of Market What is a Market in Economics? Elasticity of supply explained with its types Supply Elasticity: Elasticity of Supply explained


Academic Questions in Economics

Please click here to see all Questions and Answers

_____ is defined as a gradual and sustained rise in price level of goods and services in relation to their availability.

  • A. Basis Point Rate

  • B. Hike Rate

  • C. Elastic Supply

  • D. Elasticity of Price

  • E. Price Inflation

  • F. Aggregate Supply

The wholesalers can bring about an economy of scale.

  • A. True

  • B. False

Which of the following statement isn't a characteristics of the wholesaler?

  • A. They may have to operate in specific areas or regions accorded them by the producer

  • B. They are often popular in the line of goods they supply

  • C. They are not risk bearers

  • D. They have good storage facilities

  • E. They often pay for goods supplied by the manufacturers in advance

  • F. They usually have business agents or brokers

The wholesalers act as the middlemen in supply chain.

  • A. True

  • B. False

Large retailers who buy directly from manufacturers are termed as _____.

  • A. Wholesale Retailers

  • B. Certified Retailers

  • C. Codified Retailers

  • D. Commodity Retailers

  • E. Manufacturers Retailer

  • F. Conspicuous Retailers

_____ is a market whereby the sellers buy goods in lesser quantities from the wholesalers and sells in bits to the final consumers.

  • A. Commodity

  • B. Retail

  • C. Wholesale

  • D. Labour

  • E. Common

  • F. General

Which of the following is not a financial market?

  • A. Money Market

  • B. Bond Market

  • C. Foreign Exchange Market

  • D. Virtual Market

  • E. Capital Market

  • F. Stock Exchange Market

A _____ market provides a platform whereby job seekers link up with employers in an attempt to be hired.

  • A. Wholesale market

  • B. Bond market

  • C. Physical market

  • D. Virtual market

  • E. Factor Market

  • F. Labor Market



Graph as a Basic Tool for Economic Analysis:

Basic tools for economic analysis can be defined as various representations of data and variables in a manner that shows clarity of economic problems.

Some of the basic tools of economic analysis include tables, graphs, charts, arithmetic mean, geometric mean, harmonic mean, median, mode, arithmetic average, standard deviation, calculus, matrix and algebra.

Please read on table as a tool for economic analysis here.

 

Graphs are one of the basic tools of economic analysis. They are often used interchangeably with charts even though they aren't always the same. However, both are visual representations typically used for simplifying complex data. Through their use, complicated data can become easily understood.
 

The image below shows some graphical representation of data on the Len Academy smart school software.

Len Academy Smart School Software - Len Academy

 

Note: Data shown through graphical representation on the Len Academy smart school software include the following: 'Student summary, Staff summary and Class analysis' respectively.

Please read more on the Len Academy smart school software here.

 

While many people use ‘graph’ and ‘chart’ interchangeably, they are not necessarily the same visuals. Charts are tables, diagrams and pictures that organize large amounts of data clearly and concisely. People use charts to interpret current data and make predictions. Graphs on the other hand focuses on raw and accrued data, and these show trends over time.

 

Remember that a good graph focuses more on raw data, showing clear facts through its visual representation, and will often grab the reader's attention.

You can read on inflation in economics here.

 

A graph is a diagram showing various representation of raw and accrued data, while also displaying a functional relationship between them. These simplified data through the use of graphs can be either quantitative or qualitative. In this regard, we see a meticulous drawing consisting of lines and related variables when plotting graphs. An instance is shown below for elastic and inelastic supply.

Elastic and Inelastic Supply  - Len Academy
Graph for elastic and inelastic supply

Please read more on supply elasticity here.

 

Graphs are utilized in almost all disciplines of life. As students, they may be applied in various subject. For instance, you may have plotted graphs in mathematics, biology, economics, chemistry, government, physics and so on. The goal of such graph is to correlate or match data in a simple, concise and clear manner.

You can read interesting facts for students here.

 

Types of Graphs

Graph comes in various types as a result of their multipurpose functions. Some of these include:

  • Line Graph

  • Bar Graph

  • Pictograph

  • Area Graph

  • Histogram

  • Scatter Plot

  • Connected Graph

  • Cycle Graph

  • Directed Graph

  • Infinite Graph

  • Box Plot

  • Graph of a Function

  • Ogive

 

Understand that each of these graphs may be more appropriate than the other with regards to the type of data and their intended purpose. Some of these are shown below:

Types of Graphs - Len Academy

You can read on supply curve here.

 

Characteristics of Graphs

  1. It should have a title

  2. It should have its axises. These are typically the horizontal 'x axis' and the vertical 'y axis'. The variables on the y axis are often dependent on those in the x axis.

  3. A graph should have appropriate scales.

  4. The source of data used in plotting the graph should be seen.

  5. The graph should have an origin. This acts as a center point from which the graph is plotted.

  6. Overall, the graph should be well labelled.

  7. Appropriate coloring can be used to distinguish parts of the graph.

  8. You can read key points in economics here.

 

Importance of Graphs

  1. Data and variables presented using tables are made clearer through graphs.

  2. It shows the relationship between two or more variables. Therefore, graphs show the interpretation of variables.

  3. Generally, the use of graphs simplifies one's task.

  4. The presentation of visual information are made excellent through graphs.

  5. Calculation problems can be solved using graphs.
    You can read calculation on Charles law here.

  6. Comparison of data provided on a table are made possible through graphs.

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Amazing facts in Economics


Notable points in Economics

A unitary elasticity of supply is seen when a change in price brings about a corresponding and proportional change in the quantity of goods or services supplied.

The graph below shows a unit elasticity of supply:
Unit Elastic Supply Curve - Len Academy

Below is an instance of a unitary elasticity of supply:

  • If a 100% increase in the price of wheat translates into a 100% increase in the production and supply of wheat, then the supply elasticity is said to be unitary elastic and its value is equal to 1.

Unitary elasticity is always equal to 1, that is: Es = 1

The supply curve runs diagonally and will pass through the center.

Supply elasticity is defined as the rate at which an increase in price of goods translates into its increased production and availability in the market. Supply elasticity is also termed as price elasticity of supply.

Consider the statements below:

  • If a 100% increase in the price of rice translates into a 100% increase in the production and supply of rice, the supply elasticity is said to be unitary elastic and its value is equal to 1.

  • If a 100% increase in the price of rice translates into a 50% increase in the production and supply (quantity) of rice, the supply elasticity is said to be inelastic and its value will be greater than zero and less than 1. In this case, the exact value is 0.5: (value of change in the quantity of rice divided by value of change in price of rice = 50/100 = 0.5).

  • Please read on supply elasticity here

The individual demand schedule is a table that shows the demand of a commodity that an individual (consumer) purchased at various prices, and at a particular time.

The table below shows an individual demand schedule:

Price in Naira (of a tuber of yam)

Quantity demanded (per week)

500

5

400

10

300

15

200

20

100

25

The market demand schedule is also referred to as an aggregate demand schedule, total demand schedule or composite demand schedule.

This is a table that shows the different commodities purchased by all the consumers or customers in the market.

The market demand schedule is the summation of the individual demand schedules, showing the demand of different customers for a commodity at a particular price. It is shown in the table below:

Unit price of commodity (Naira)

Quantity demanded by consumer A (QA)

Quantity demanded by consumer A (QB)

Market demand (QA +  QB)

50

20

15

35

40

40

30

70

30

60

45

105

20

80

60

140

10

100

75

175

 

From the above table, notice that when the unit price of the commodity was 50 Naira, consumer A demanded 20 quantities while consumer B demanded 15 quantities.

Please read more on demand schedule here.

Below are definitions of demand from the perspective of some notable professors:

The demand for goods is a schedule of the amounts that buyers would be willing to purchase at all possible prices at any one instant of a time.

Professor Mayers

Demand is the various quantities of goods that would be purchased per time period at different prices in a given market.

Professor Hibdon

The demand for anything, at a given price is the amount of it which will be bought per unit of time at the price.

Professor Benham

Generally, demand is defined as the willingness of a person, buyer or consumer to buy a specific quantity of goods or service at a given price and time.

From the above definitions, we can infer that the definition of demand is referenced to three major factors. These are:

  1. Quantity of Goods Demanded

  2. Price

  3. Time

Please read more on the concept of demand here.