The basic purpose of the other-things-equal (ceteris paribus) assumption is to:

• A. isolate the effect of one variable by holding other relevant factors constant
• B. eliminate the concept of opportunity cost from decision-making
• C. allow all variables to change simultaneously in an economic analysis
• D. assume that resources are unlimited in the economy

Answer: (A)

Verified step by step guidance

1. Understand that the ceteris paribus assumption is a fundamental concept in microeconomics used to simplify analysis by focusing on the relationship between two variables at a time.
2. Recognize that 'ceteris paribus' means 'all other things being equal' or 'holding other relevant factors constant.' This allows economists to isolate the effect of one variable without interference from changes in other variables.
3. Evaluate each option by considering whether it aligns with the purpose of isolating variables: eliminating opportunity cost is incorrect because opportunity cost is a core economic concept; allowing all variables to change simultaneously contradicts the idea of holding other factors constant; assuming unlimited resources is unrelated to the ceteris paribus assumption.
4. Conclude that the correct purpose of the ceteris paribus assumption is to isolate the effect of one variable by holding other relevant factors constant, enabling clearer analysis of cause and effect in economic models.
5. Summarize that this assumption helps simplify complex economic relationships and makes theoretical predictions more manageable and understandable.