Economics, 3rd Edition

Curves in the Coordinate System

Students who study more do tend to get higher marks, but other factors also influence a student’s marks. 

Previous preparation is an important factor, for instance, as are talent, attention from teachers and even 

eating a good breakfast. A scatter plot like Figure 2A.3 does not attempt to isolate the effect that study 

has on grades from the effects of other variables. Often, however, economists prefer looking at how one 

variable affects another while holding everything else constant. The principle used here is referred to as 

ceteris paribus, a Latin phrase which roughly translated means ‘other things being equal’. Economists 

analyse problems which they fully understand have multiple factors which could be affecting outcomes 

being investigated. In order to try and isolate the factors which are the most significant ones, the principle 

of ceteris paribus is used. It enables us to look at how changes in one variable affect outcomes assuming 

other variables that we know might have an effect are held constant. We can then look at the other vari-

ables in turn and build a more complete picture of the effect of changes in variables.

To see how this is done, let’s consider one of the most important graphs in economics – the demand 

curve. The demand curve traces out the effect of a good’s price on the quantity of the good consumers 

want to buy. Before showing a demand curve, however,  consider Table 2A.1, which shows how the 

number of novels that Maria buys depends on her income and on the price of novels. When novels are 

cheap, Maria buys them in large quantities. As they become more expensive, she borrows books from the 

library instead of buying them or chooses to go to the cinema instead of reading. Similarly, at any given 

price, Maria buys more novels when she has a higher income. That is, when her income increases, she 

spends part of the additional income on novels and part on other goods.