Question

In economics, functions often describe cause and effect. In an economic function, the variable being described on the left-hand side represents a(n) ________

Answer 1

ANSWER: Dependent Variable

EXPLANATION : Studying variables cause - effect relationship is an important part of Economics. Ex : Law of demand - price & demand relationship , Law of Diminishing Marginal Utility - quantity & utility relationship.

The relationships are determined in 'functional forms' with usually dependent variable on the left side & independent variable on the right side .

Dependent Variable is the one being affected by independent variable , independent variable impacts dependent variable .

Eg : Micro Economics 'Law of demand' implies price inverse impact on demand , price increase - demand decrease , price decrease - demand increase.

So demand function is : Qd = A - bP ; where Qd & P are quantity demanded & price , A is autonomous demand , -b is change in demand due to change in price (negative because of inverse relationship)

Similarly Macro Economics 'Consumption Function' reflecting positive relationship of Income on Consumption is :

C = A + bY

Both the illustrations have shown how dependent variables - Demand & Income are on left side of the Function .