Graphing Economic Data: Practice Problems

Problem 1:

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Provenance: Peter Schuhmann, University of North Carolina-Wilmington
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In a study of happiness after eating cookies, a researcher collected the data in the table above. Each cookie eaten is rated for the happiness it provides, on a scale of 1-10.

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Provenance: Peter Schuhmann, University of North Carolina-Wilmington
Reuse: This item is offered under a Creative Commons Attribution-NonCommercial-ShareAlike license http://creativecommons.org/licenses/by-nc-sa/3.0/ You may reuse this item for non-commercial purposes as long as you provide attribution and offer any derivative works under a similar license.

Then the rating values are added up to show a cumulative, total happiness. The resulting table is shown above.

There will be two graphs: one for showing the additional happiness for each cookie, and a second for showing the total happiness.

Questions:

1. Will the researcher draw time series or scatter plot graphs?
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   Both graphs will be scatter plots.
2. Which variable will go on the X axis?
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   Cookies eaten is the 'causing' or independent variable, and therefore it will go on the X axis.
3. What scale will be best for the axes on each graph?
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   For both graphs, the X axis --- for cookies eaten --- will go from 0 to 10. For additional happiness the Y axis will go from 0 to 10. For total happiness, the Y axis scale will go from 0 to 30.
4. Picture what each of the two graphs will look like. Will there be a positive or negative relationship? Will the graph be linear or non-linear?
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   Provenance: Peter Schuhmann, University of North Carolina-Wilmington
   Reuse: This item is offered under a Creative Commons Attribution-NonCommercial-ShareAlike license http://creativecommons.org/licenses/by-nc-sa/3.0/ You may reuse this item for non-commercial purposes as long as you provide attribution and offer any derivative works under a similar license.

   The graph for additional happiness is negative and linear.
   
   
   

   

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   Provenance: Peter Schuhmann, University of North Carolina-Wilmington
   Reuse: This item is offered under a Creative Commons Attribution-NonCommercial-ShareAlike license http://creativecommons.org/licenses/by-nc-sa/3.0/ You may reuse this item for non-commercial purposes as long as you provide attribution and offer any derivative works under a similar license.

   The graph for total happiness is positive and non-linear.
   
   
   
5. What do the graphs tell the researcher?
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   Both graphs show that happiness increases as more cookies are eaten, but that happiness increase occurs at a decreasing rate. Economists call this diminishing marginal returns.

Problem 2:

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Provenance: Peter Schuhmann, University of North Carolina-Wilmington
Reuse: This item is offered under a Creative Commons Attribution-NonCommercial-ShareAlike license http://creativecommons.org/licenses/by-nc-sa/3.0/ You may reuse this item for non-commercial purposes as long as you provide attribution and offer any derivative works under a similar license.

A researcher collects the above data for the US economy between 2010 and 2014 and creates three graphs:

1. The unemployment rate 2010-2014
2. The inflation rate 2010-2104
3. The unemployment rate compared to the inflation rate in each year, 2010-2104

Questions:

1. Which of the graphs will be time series graphs? Which graphs will be a scatter plots?
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   • The unemployment rate 2010-2014 and inflation rate 2010-2014 will be time series graphs.
   • The comparison of the unemployment rate and inflation rate will be a scatter plot.
2. Which variables will be on the X axis? Which on the Y axis?
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   • For the time series graphs, the years 2010-2014 will be in the X axis. Unemployment and inflation will be on the Y axis.
   • For the scatter plot, graph 3, by tradition economists put price data on the Y axis and unemployment on the X axis.
3. What scale will best for each graph?
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   • For the time series, the X axis will go from 2010 to 2014.
   • Unemployment will have a scale 0 to 10 with increments of 1.0.
   • Inflation will have a scale 0 to 3.5 with increments of 0.5.
4. Picture what each graph will look like. Will there be a positive or negative relationship? Will the graph be linear or non-linear?
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   Provenance: Peter Schuhmann, University of North Carolina-Wilmington
   Reuse: This item is offered under a Creative Commons Attribution-NonCommercial-ShareAlike license http://creativecommons.org/licenses/by-nc-sa/3.0/ You may reuse this item for non-commercial purposes as long as you provide attribution and offer any derivative works under a similar license.

   Graph 1. the unemployment rate for 2010 to 2014 will be nearly-linear and negative.
   
   
   

   

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   Provenance: Peter Schuhmann, University of North Carolina-Wilmington
   Reuse: This item is offered under a Creative Commons Attribution-NonCommercial-ShareAlike license http://creativecommons.org/licenses/by-nc-sa/3.0/ You may reuse this item for non-commercial purposes as long as you provide attribution and offer any derivative works under a similar license.

   Graph 2. the inflation rate 2010 to 2014 will be non-linear, showing that the inflation fell, went up, then down.
   
   
   

   

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   Provenance: Peter Schuhmann, University of North Carolina-Wilmington
   Reuse: This item is offered under a Creative Commons Attribution-NonCommercial-ShareAlike license http://creativecommons.org/licenses/by-nc-sa/3.0/ You may reuse this item for non-commercial purposes as long as you provide attribution and offer any derivative works under a similar license.

   Graph 3. the unemployment rate and inflation rate is a scatter with no trend.
   
   
   
5. What are some conclusions the economist could make, based on each of these graphs?
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   • The unemployment rate fell at a steady rate between 2010 and 2014.
   • The inflation rate moved up and down during this period, showing no trend.
   • There was no measurable relationship between the unemployment rate and inflation rate during this time period.