Definition of Inversely Related:
Two variables areinversely related when an increase in one variable causes a reduction in the other variable. For example, when the price of a good increases, its quantity demanded decreases.
Detailed Explanation:
The relationship between speed and the time it takes to arrive somewhere are inversely related. The faster the speed, the shorter the time needed. Examples of inverse relationships abound in economics. For consumers, the price of a product is inversely related to the amount they will purchase. When the price of a good or service increases the quantity purchased drops. For example, John would ride a roller coaster ten times at $1.00 a ride, but only three times if $4.00 is charged. The relationship between the demand of a good or service and the price of its complements are inversely related. If computer prices decrease, the demand for printers increases. The Phillips Curve illustrates the inverse relationship between inflation and unemployment. In the short run, as unemployment decreases, the economy heats up and prices increase. In each example, when one variable increases, the other decreases.
Dig Deeper With These Free Lessons:
Demand – The Consumer's Perspective
Price Elasticity of Demand – How Consumers Respond to Price Changes
Fiscal Policy – Managing an Economy by Taxing and Spending
Business Cycles
