Scattergraph Method

Quick, the statisticians are coming—everyone scatter!

Scattergraphs are those graphs that have a bunch of dots scattered everywhere. If it’s a line of scattered dots, there’s some kind of relationship there. If the dots are scattered everywhere, no relation.

The scattergraph method is a way that firms use the scattergraph to map out total costs against units of a good. The total costs, on the vertical y-axis, include both fixed and variable costs. On the x-axis, the quantity of the good (i.e. “units” in biz-speak…”quantity” is more econ-speak).

Scattergraphs using the scattergraph method usually show a line(ish) going from bottom left to upper right. As more units are produced, costs rise. Since the scattergraph method uses total costs, it’s a great visual representation for how much a certain level of production will cost, helping firms figure out their budgets.

Still, the scattergraph method is just an estimate, not a finely tuned tool. Things happen; there could be a shortage of a variable input, a drop in demand...you never know.