## Ceteris Paribus

Read this brief text to learn the formal definition of ceteris paribus. As a practice activity, identify a variable and list the multiple factors that may be influencing it. For example, say you are planning to request an increase in your salary. What are the factors that influence your salary? Do you think you can attribute the change in your salary to any one of these factors if all of the factors influencing it were simultaneously changing?

### Introduction

Ceteris paribus is defined as "all else being equal", or "holding all else constant".

#### Learning Objectives

• Explain the rationale for the assumption of ceteris paribus

#### Key Points

• When ceteris paribus is employed in economics, all other variables with the exception of the variables under evaluation are held constant.
• An example of the use of ceteris paribus in macroeconomics is: what would happen to the demand for labor by firms if a minimum wage was imposed at a level above the prevailing wage rate, ceteris paribus.
• An example of the use of ceteris paribus in microeconomics is: what would happen for the demand for a normal good when income increases, ceteris paribus.

#### Key Terms

• ceteris paribus: all else equal; holding everything else constant

Economics seeks to interpret, analyze and or evaluate situations that occur between individuals, firms and other entities. Due to the potential for multiple agents and other known and unknown external activities to be involved or present but not relevant to an analysis, economics employs the assumption of "all else constant," which is the English translation of the Latin phrase "ceteris paribus".

When the ceteris paribus assumption is employed in economics, all other variables – with the exception of the variables under evaluation – are held constant.

Source: Lumen Learning, https://courses.lumenlearning.com/boundless-economics/chapter/demand/