Graphs in Economics

First, here's an open secret - adding a graph to your answer in economics gets you more marks - plain and simple! So, that is why graphs seem to follow you everywhere you go since you started studying economics. That is because economics can be very wordy, and it is essential for graphs in economics to show you things in visual format! (a picture speaks a thousand words, or whatever they say). So, let's find out all about the graphs in economics.

Economics Graph Meaning

Here you are, you have a vague idea of what an economics graph looks like, but when asked, what are you going to say? Generally speaking, a graph is a visual illustration of numerical information. While simple numbers may be easy to present in numerical format, numbers that are relative to other numbers may be confusing, and graphs help you visualize these relationships. Graphs in economics serve this purpose. It takes very confusing numbers and presents them in the form of patterns. These patterns retain the complete information, yet, they appear summarized, making graphs ideal for simplifying (complicated) things.

Economists plot graphs on two axes: the vertical axis, also known as the y-axis, and the horizontal axis, also known as the x-axis. Look at figure 1.

Figure 1. Economics Graph, StudySmarter Originals

Importance of Graphs in Economics

The importance of graphs in economics is this; they simplify numerical data to improve readability.

However, economics graphs are also important because they illustrate the relationships and connections between different variables or concepts in economics. For instance, graphs are important in visualizing the relationship between the price and the quantity of a good. What would take several lines of text to understand can take an instant to understand with the help of a graph.

Types of Economics Graphs

Let's make it clear from the start that you'll most likely be encountering line graphs a majority of the time. However, there are three main types of economics graphs, and they include line, bar, and pie graphs. We'll discuss them here.

The first and most used type of economics graph is the line graph. Line graphs show the relationship between two economic variables plotted on the horizontal and vertical axes. Let's look at the following example.

From the simple example above, we can see that the price of apples and the quantity of apples are interacting with each other. So, how do we show you a picture of this? We use the line graph as shown in Figure 2.

Figure 2 shows that the quantity increases when the price decreases. This indicates that Kent is willing to buy more apples when the price goes down. This is a demand curve showing the negative relationship between price and quantity!

The second type of economics graph is the bar graph. This one just compares quantities. For example, you would see the numbers, 1013, 1035, and 1033, representing the number of fish in ponds A, B, and C respectively. The bar graph helps you get the whole picture and shows the differences between the three ponds based on the height of the bars. Look at Figure 3.

Figure 3. Bar Graph in Economics, StudySmarter Originals

The third type of economics graph is the pie graph, which is also used to compare quantities. However, this compares quantities as fractions of a single whole.

Let's say there is a small market with 5 blue shirt sellers, 3 green shirt sellers, and 2 pink shirt sellers, making a total of 10 shirt sellers. Look at Figure 4 as an example of a pie graph.

Figure 4. Pie Graph in Economics, StudySmarter Originals