To test the theory that if the price of pens rises, then pen purchases fall, an economist would
A) collect data on the price of pens and the price of pencils because the two goods are substitutes.
B) investigate whether people purchase more pens when their income rises.
C) analyze data on pen purchases linked to the price of pens, holding other factors constant.
D) ask his or her friends if they would buy fewer pens when the price rises.

Question

Quizplus · Accepted Answer

To test the theory of how two variables are related, an economist needs to analyze the data on both variables holding other factors constant. This is known as ceteris paribus analysis. Therefore, to test the theory that if the price of pens rises, pen purchases fall, the economist needs to analyze data on pen purchases linked with the price of pens, holding other factors constant. Options A, B, and D are not relevant to test the theory. A is incorrect because pencils are substitutes for pens, and their price doesn't impact pen purchases. B is incorrect because it investigates the relationship between pen purchases and income, which is not related to the theory being tested. D is incorrect because the opinions of non-representative friends do not provide useful data to test the theory.

To Test the Theory That If the Price of Pens