The assumption of ceteris paribus is important because it:
A) Allows us to focus on the effects of a change in one variable at a time.
B) Explains the concept of diminishing marginal utility.
C) Determines the point where total utility is maximized.
D) Explains the reason for government failure.

Question

Quizplus · Accepted Answer

The assumption of ceteris paribus allows us to focus on the effects of a change in one variable at a time, keeping all other variables constant. This is important in economics because it helps us to isolate and understand the causal relationship between different variables, without being distracted by other factors that may also be affecting the outcome.

The Assumption of Ceteris Paribus Is Important Because It