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Ceteris paribus has been relevant in economics for centuries, in which the majority of the phrases first uses were in economic contexts, dating back to its first traces in 1295 by Peter Olivi. The earliest case of the Latin phrase being used in the English language publications was in the 17th century by William Petty , who used the clause to ...
ceteris paribus "other things being equal" Commonly used in economics, ceteris paribus allows for supply and demand models to reflect specific variables. If one assumes that the only thing changing is, say, the price of wheat, then demand and supply will both be affected appropriately.
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
The relationship between price and quantity demanded holds true so long as it is complied with the ceteris paribus condition "all else remain equal" quantity demanded varies inversely with price when income and the prices of other goods remain constant. [3] If all else are not held equal, the law of demand may not necessarily hold. [4]
[10] [11] Aristotle writes in his Posterior Analytics, "We may assume the superiority ceteris paribus [other things being equal] of the demonstration which derives from fewer postulates or hypotheses." Ptolemy (c. AD 90 – c. 168) stated, "We consider it a good principle to explain the phenomena by the simplest hypothesis possible." [12]
In general equilibrium analysis, on the other hand, the prices and quantities of all markets in the economy are considered simultaneously, including feedback effects from one to another, though the assumption of ceteris paribus is maintained with respect to such things as constancy of tastes and technology.
Part of the reason one input is altered ceteris paribus, is the idea of disposability of inputs. [25] With this assumption, essentially that some inputs are above the efficient level. Meaning, they can decrease without perceivable impact on output, after the manner of excessive fertiliser on a field.
The wealth elasticity of consumption quantity for some good will determine the size of the expenditure shift due to unexpected changes in net personal wealth, ceteris paribus (i.e. the size of the so-called "wealth effect" for a given good).