Economics, 3rd Edition

Calculating the Slope of a Line

To calculate the slope of the demand curve, 

we can look at the changes in the 

y- and 

x-coordinates as we move from the point  

(21 novels, 

€6

) to the point (13 novels,  

€8

). The slope of the line is the ratio of 

the change in the 

y-coordinate (–2) to the 

change in the 

x-coordinate (+8), which 

equals 

–1/4.

C

l

l ti

th

S

l

FIGURE 2A.7

(13, 

€8)

(21, 

€6)

6 – 8 = – 2

21 – 13 = 8

11

12

10

9

8

7

6

5

4

3

2

1

0

0

5

10

15

13

21

20

25

Demand, 

D

1

Demand, 

D

2

30

35

Quantity of novels purchased

P

rice of no

vels (

€)

---

CHAPTER 2  THINKING LIKE AN ECONOMIST  39

What should we make of this result? Big Brother advises a quick policy response. It recommends that 

the government discourages the ownership of cigarette lighters by taxing their sale. It also recommends 

that the government requires warning labels: ‘Big Brother has determined that this lighter is dangerous 

to your health.’

In judging the validity of Big Brother’s analysis, one question is paramount: has Big Brother held con-

stant every relevant variable except the one under consideration? If the answer is no, the results are sus-

pect. An easy explanation for Figure 2A.8 is that people who own more cigarette lighters are more likely 

to smoke cigarettes and that cigarettes, not lighters, cause cancer. If Figure 2A.8 does not hold constant 

the amount of smoking, it does not tell us the true effect of owning a cigarette lighter.

This story illustrates an important principle: when you see a graph being used to support an argument 

about cause and effect, it is important to ask whether the movements of an omitted variable could explain 

the results you see.