How does the ceteris paribus assumption affect the demand curve?

• A. It means the demand curve will always be upward sloping.
• B. It ensures that the demand curve reflects the relationship between price and quantity demanded, holding all other factors constant.
• C. It requires that both price and quantity demanded change simultaneously due to external factors.
• D. It allows the demand curve to shift in response to changes in consumer income.

Answer: (B)

Verified step by step guidance

1. Understand that the ceteris paribus assumption means 'all other things being equal' or 'holding other factors constant.' This is crucial in microeconomics to isolate the effect of one variable on another.
2. Recognize that the demand curve shows the relationship between the price of a good and the quantity demanded by consumers.
3. Apply the ceteris paribus assumption to the demand curve by holding all other factors that affect demand (such as consumer income, tastes, prices of related goods) constant, so that only price changes influence quantity demanded.
4. This assumption ensures that movements along the demand curve are caused solely by changes in the good's own price, not by shifts in the curve due to other factors.
5. Therefore, the ceteris paribus assumption allows us to analyze the pure relationship between price and quantity demanded without interference from external changes.