hi friends,
what is the meaning of the statement in economics study material page no. 7
"Money which is used to measure outcomes in economics is itself a dependent variable".
1 Replies
SamTK
(Chartered Accountant)
(194 Points)
Replied 17 April 2012
Hi Venkata,
""Money which is used to measure outcomes in economics is itself a dependent variable".
I'll break it into two parts.
1. "Money which is used to measure outcomes in Economics"
Most answers in economics are calculated in monetary terms, or include money as a part of their equation. For example, GDP is based on monetary terms, Demand Elasticity of a commodity includes the change in percentage of money. Likewise, most calculations in Economics use money as a measuring unit.
2. "is itself a dependent variable"
There are two types of variables in Mathematics. We generally denote them by the letters x & y. While plotting a graph, we put Y(vertical axis) against X(horizontal axis). During our calculations, we take X to be the independent variable and Y to be the dependent variable, and if you recall plotting supply-demand curves, you always put money on the Y axis and quantity demanded/supplied on the X axis.
A dependent variable is one which is influenced by the change in an independent variable. That is, money, while is the measuring unit in Economics is influenced by factors like demand and supply. It changes with regards to the quantity of the independent variable. In mathematical terms, X is a function of Y i.e. dependent variable is a function of an independent variable. Money would change in a certain proportion with an independent variable, in our case the quantity demanded or supplied.
That, in short means, a dependent variable is influenced by an independent variable, but the reverse is not held true.
https://en.wikipedia.org/wiki/Dependent_and_independent_variables
Here's a wikipedia link that might help you understand the concept of variables better.
Hope this helped.
Best regards,
Sam
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