What is Ceteris Paribus Assumption?

Ceteris Paribus Assumption states that all other factors remain unchanged when analyzing the effects of a single variable.

For example, if we analyze the effects of a price change on demand, we assume that other factors such as income and consumer tastes remain the same.

Another example is studying the effect of a change in interest rates on investment. We assume that other factors such as taxes, regulations, and availability of funds remain constant.

In the field of economics, the Ceteris Paribus Assumption is used to identify the effect of one variable on another.

For example, if we analyze the effect of a rise in taxes on consumer spending, we assume that other factors such as income and prices of goods remain unchanged.

In the field of medicine, the Ceteris Paribus Assumption is used to isolate the effects of one treatment from another.

For example, when studying the effects of a new drug on a patient's health, we assume that other treatments are not being taken.

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