In economics, the phrase 'everything else equal' is commonly used to indicate which of the following?

• A. That the analysis considers only historical data
• B. That only irrelevant factors are ignored in analysis
• C. That all other relevant factors are held constant while analyzing the effect of one variable
• D. That all variables are allowed to change simultaneously

Answer: (C)

Verified step by step guidance

1. Understand that the phrase 'everything else equal' (also known as 'ceteris paribus') is a fundamental assumption in economic analysis.
2. Recognize that this phrase means when analyzing the effect of one variable, all other relevant factors are held constant to isolate the impact of that single variable.
3. Note that this assumption does not imply considering only historical data or ignoring irrelevant factors; rather, it focuses on controlling relevant variables.
4. Understand that allowing all variables to change simultaneously would make it difficult to determine the effect of one specific variable, which is why 'everything else equal' is used to simplify analysis.
5. Therefore, the phrase 'everything else equal' means that all other relevant factors are held constant while analyzing the effect of one variable.