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

### 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.

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.

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

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.

Graph for elastic and inelastic supply

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:

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.