Multiple Choice
Which of the following best describes the type of human behavior that economists should observe when creating positive economic models?
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0. Basic Principles of Economics
Positive and Normative Analysis
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Which of the following statements best describes the economic idea of ceteris paribus?
A
It is used to compare the actual outcomes of different economic systems.
B
It refers to the belief that economic policies should be evaluated based on moral judgments.
C
It means that all variables in an economic model change simultaneously.
D
It assumes that all other relevant factors remain constant while analyzing the effect of one variable.
Verified step by step guidance1
Understand that the term 'ceteris paribus' is a Latin phrase commonly used in economics to simplify analysis by isolating the effect of one variable.
Recognize that 'ceteris paribus' means 'all other things being equal' or 'all other relevant factors remain constant.'
Apply this concept to economic models where we want to study the impact of a single change without interference from other changing variables.
Compare the given statements to see which one aligns with this definition: the correct statement should emphasize holding other factors constant while analyzing one variable.
Conclude that the best description of 'ceteris paribus' is the statement that assumes all other relevant factors remain constant while analyzing the effect of one variable.
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