During the summer, the largest computer game retailer has a massive sale. As prices for computer games fall, consumers purchase more games, ceteris paribus.
1. What does the term ceteris paribus mean in the statement above?
A. That the basic concepts of economics do not apply.
B. Allowing all economic variables to change.
C. That it is an easy to understand statement and does not require complex analysis.
D. Holding all else equal (unchanged).
2. Why, if at all, is the ceteris paribus condition important in economic analysis?
A. It is not important.
B. It allows us to analyze how a single change affects an economic environment.
C. It allow us to analyze how changes in every economic variable at once affects an economic environment.