regulations requiring the installation of costly pollution-control technology.

Moreover, rising incomes and population or changes in gasoline prices will affect many markets, not just cars.

How can an economist sort out all these interconnected events? The answer lies in the ceteris paribus

assumption. Look at how each economic event affects each market, one event at a time, holding all else

constant. Then combine the analyses to see the net effect.

A Combined Example

The U.S. Postal Service is facing difficult challenges. Compensation for postal workers tends to increase most

years due to cost-of-living increases. At the same time, increasingly more people are using email, text, and

other digital message forms such as Facebook and Twitter to communicate with friends and others. What does

this suggest about the continued viability of the Postal Service? Figure 3.18 and the text below illustrate this

using the four-step analysis to answer this question.
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