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Chapter 3: Q 2. (page 77)

Why do economists use the ceteris paribus assumption?

Short Answer

Expert verified

The ceteris paribus assumption is used by economists to simplify the analysis of difficult problems.

Step by step solution

01

Step 1. What is ceteris paribus?

Ceteris paribus is a Latin word that roughly translates as "everything else being equal." a According to economists, it serves as a quick indicator of the impact of one economic indicator on another, assuming that all other factors remain constant.

02

Step 2. What is the ceteris paribus assumption and why is it used by economists?

The ceteris paribus assumption is used by economists to simplify the analysis of difficult problems. Ceteris paribus permits you to examine the impact of one thing at a time on whatever you're attempting to figure out. You add the data together to reach the final answer after you've studied all of the components individually.

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Most popular questions from this chapter

What is the difference between the supply and the quantity supplied of a product, say milk? Explain in words and show the difference on a graph with the

supply curve for milk.

A low-income country decides to set a price ceiling on bread so it can make sure that bread is affordable to the poor. Table 3.11 provides the conditions of demand and supply. What are the equilibrium price and equilibrium quantity before the price ceiling? What will the excess demand or the shortage (that is, quantity demanded minus quantity supplied) be if the price ceiling is set at \(2.40? At \)2.00? At $3.60?

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Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.

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