How did the assasination of an Austrian cause all of Europe to fight each other basically?
Because of treaties and because of fear is the basic answer.
Treaties in the sense that Russia and France had agreed to defend each other against the Germans if they attacked.
Fear is what made the Germans and Austrians attack.
Specifically the Germans were deadly afraid of the Russian Empire, this huge country with vast resources and endless manpower, which was industrializing at rapid speed. The were paranoid about being overtaken by the Russians, and in particular they were afraid about the massive expansion of the armed forces the Russians were undertaking at that moment, a program that would be complete in 1917.
German general staff believed that 1914 was the last year that Germany could beat the Russians.
As you can understand that really made them eager to fight now, in 1914. And that when the Austrians asked for their help in what would turn into a general european war, the Germans took that oppportunity.
But it was not the Germans that sparked WW1, but the Austrians.
And they were in even worse shape. Because the very concept of Austria-Hungary was outdated in 1914. A big multiethnic empire kept together only because the royal family held the various titles that composed the empire.
But this was the age of nationalism, and Austria was surrounded by national states who had many of their brethren still living inside the Austrian empire. Romanians, Serbs, and Italians.
For Austria the threat was clear and imminent. Either they manage to dominate Northern Italy and the Balkans, or their empire will collapse.
If you see your current predicament as doomed, then starting a war is no longer a terrible prospect to be avoided. It becomes an alluring easy fix for a big problem that seems unsolvable otherwise.
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