Which of the following is an example of an application of the ceteris paribus assumption?
A) an analysis of how price changes affect how much of a good people will purchase when all other factors are held constant
B) an analysis of how people purchase more goods when prices decline and income increases
C) After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase.
D) an analysis of how worker productivity increases when a firm invests in new machines and training programs

Question

Quizplus · Accepted Answer

The ceteris paribus assumption is used to isolate the effect of a single variable on an outcome, holding all other factors constant. Choice A is an example of this as it examines how price changes affect the quantity demanded of a good when all other factors remain unchanged. The other choices do not explicitly use the ceteris paribus assumption.

Which of the Following Is an Example of an Application