horizontal axis and price on the vertical axis. The assumption behind a demand curve or a supply curve is that

no relevant economic factors, other than the product’s price, are changing. Economists call this assumption

ceteris paribus, a Latin phrase meaning “other things being equal.” Any given demand or supply curve is

based on the ceteris paribusassumption that all else is held equal. A demand curve or a supply curve is a

relationship between two, and only two, variables when all other variables are kept constant. If all else is not

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held equal, then the laws of supply and demand will not necessarily hold, as the following Clear It Up feature

3.2 • Shifts in Demand and Supply for Goods and Services 55

shows.

CLEAR IT UP

When does ceteris paribusapply?
We typically apply ceteris paribuswhen we observe how changes in price affect demand or supply, but we can apply
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