The correct answer is: A. Other things remaining same.
Ceteris paribus is a Latin phrase that means “all other things being equal.” It is used in economics to refer to the assumption that all other factors that could affect an outcome are held constant. This allows economists to isolate the effects of one particular factor on an outcome.
For example, if an economist is studying the effect of a change in the minimum wage on employment, they might assume that all other factors that could affect employment, such as the level of unemployment, the cost of living, and the demand for labor, are held constant. This allows them to isolate the effect of the change in the minimum wage on employment.
Ceteris paribus is a useful tool for economists, but it is important to remember that it is just an assumption. In reality, there are many factors that can affect an outcome. Therefore, the results of an economic study that uses ceteris paribus should be interpreted with caution.
Here is a brief explanation of each option:
- Option B: All variables are independent. This is not the correct answer because ceteris paribus does not assume that all variables are independent. In fact, it is often the case that variables are interrelated. For example, the demand for a product is likely to be affected by the price of the product, the income of consumers, and the prices of other products.
- Option C: Enable economists to simplify reality. This is a correct statement, but it is not the complete answer. Ceteris paribus allows economists to simplify reality by isolating the effects of one particular factor on an outcome. This makes it possible to identify the causal relationship between two variables.
- Option D: That no other assumptions are made. This is not the correct answer because ceteris paribus is just one assumption that economists make. Other assumptions that economists make include the assumption of rationality and the assumption of perfect competition.