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Step 3. Draw the Curve

15 January, 2016 - 09:47

The final step is to draw the curve that shows the relationship between the number of passengers who ride the bus and the club’s revenues from the trip. The term “curve” is used for any line in a graph that shows a relationship between two variables.

We draw a line that passes through points A through E. Our curve shows club revenues; we shall call itR1. Notice that R1 is an upward-sloping straight line. Notice also that R1 intersects the vertical axis at $200 (point A). The point at which a curve intersects an axis is called the intercept of the curve. We often refer to the vertical or horizontal intercept of a curve; such intercepts can play a special role in economic analysis. The vertical intercept in this case shows the revenue the club would receive on a day it offered the trip and no one rode the bus.

To check your understanding of these steps, we recommend that you try plotting the points and drawing R1 for yourself in Panel (a). Better yet, draw the axes for yourself on a sheet of graph paper and plot the curve.