The Latin term “ceteris paribus” means: 1) that economics deals with facts, not values. 2) other things equal. 3) prosperity inevitably follows recession. 4) that if event A precedes event B, A has caused B.
The Correct Answer and Explanation is:
Correct Answer:
2) Other things equal
Explanation:
The Latin phrase “ceteris paribus” translates to “other things being equal” or simply “other things equal.” This concept is widely used in economics to isolate the relationship between two variables by assuming that all other relevant factors remain constant.
For example, when analyzing how a price increase affects the quantity demanded of a product, economists say: “Ceteris paribus, a rise in price leads to a fall in quantity demanded.” This means that the conclusion holds true only if all other factors, such as consumer income, preferences, and prices of related goods, do not change during the analysis.
This assumption is necessary because economic systems are complex and involve many interacting variables. By holding everything else constant, economists can better understand cause and effect. It allows for cleaner and more precise models that help explain real-world behavior.
Using ceteris paribus does not imply that other factors are unimportant. Instead, it acknowledges that to understand the effect of one variable, we must temporarily ignore others. Once the relationship between two variables is understood, additional factors can be gradually introduced to build a more complete model.
The other answer choices are incorrect interpretations:
- Option 1 refers to positive vs. normative economics, not ceteris paribus.
- Option 3 makes a claim about the business cycle, which has no relation to the term.
- Option 4 suggests a causal fallacy where sequence implies causation, which is not what ceteris paribus addresses.
Thus, “other things equal” is the correct and widely accepted translation and meaning of ceteris paribus in economics.
