Ceteris Paribus helps to isolate all independent variables except one which may affect a dependent variable. Because, in actual it is almost impossible to exactly determine the relationship between the price of a good (independent variable) and the quantity demanded of it on a specific price (dependent variable), while also taking into account other independent variables that affect the demand. Hence, we use the Ceteris Paribus assumption to assume that other independent variables will remain unchanged.
English & Urdu Meaning
- Ceteris Paribus is a Latin phrase that means, “Other things being equal” or “Other things remain the same” or “Other factors or circumstances remain the same”.
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Ceteris Paribus Fallacy
It is an assumption that all else things are equal or will remain unchanged if a particular variable is changed. This assumption is sometimes useful to predict the impact of a particular change, but in the real world, we can’t even assume a hint of a shade of a glimmer of validity.
Ceteris Paribus Factors
Its factors depend on the economic laws. For example, its factors for the law of demand are as under:-
- Price of Substitute Goods
- Price of Complements Goods
- Consumer’s Income
- Goods Quality
- Weather Condition
- Psychic State of Consumer
- Number of Consumers in the Market
- Future Expectations
Quiz with Answers
- Ceteris paribus is used in economics when
- Two variables are positively related
- Two variables are negatively related
- The value of an independent variable affecting the dependent variable is held constant
- The value of a dependent variable affecting the independent variable is held constant
- What does ceteris paribus mean?
- Scientific method
- Rational thinking
- Other things remaining the same
- There is no such thing as a free lunch
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