[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Now look at point A, where the economy is producing more butter. The area around
A has been blown up in panel C. Here, we see that when we increase butter by 1 more
unit, the reduction in guns is greater than before. The slope at A (again, millions of
fewer guns produced per extra ton of butter) is
rise 38−40
= = −2.
run 91−90
Figure 2.7
LIMITING CASES
In panel A, the slope of a vertical line is
infinite. In panel B, the slope of a horizontal
line is zero.
A
With curves such as the production possibilities curve, the slope differs as we move
along the curve.
INTERPRETING CURVES
Look at Figure 2.9. Which of the two curves has a steeper slope? The one on the left
appears to have a slope that has a larger absolute value. But look carefully at the
axes. Notice that in panel A, the vertical axis is stretched relative to panel B. The
same distance that represents 20 CDs in panel B represents only 10 CDs in panel A.
VARIABLE y
The slope of
a vertical line
is infinite
VARIABLE x
B
B
Rise
––––
Run
=
69 – 70
–––––––
71 – 70 = – 1
GUNS (MILLIONS)
100
80
60
40
A
Production
possibilities
curve
E
72
70
68
66
0
A
E
68 70 72
46
44
42
40
38
Rise
––––
Run
=
C
38 – 40
–––––––
91 – 90 = – 2
A
VARIABLE y
The slope of a flat,
horizontal line
is zero
VARIABLE x
20
36
0
20 40 60 80 100
BUTTER (TONS)
0 86 88 90 92
FIGURE 2.8
THE GUNS AND BUTTER TRADE-OFF
Panel A shows a trade-off between military spending (“guns”) and civilian spending
(“butter”), where society chooses point E. Panel B is an enlargement of the area around
E, which focuses on the slope there, which also measures the marginal trade-offs society
faces near that point. Similarly, panel C is an enlargement of the area around A and
shows the marginal trade-offs society faces near that point.
APPENDIX: READING GRAPHS ∂ 49