What is Ceteris Paribus In Economics?

Ceteris paribus is a Latin phrase that means all variables other than the ones being studied are assumed to be constant.Literally, ceteris paribus means “other things being equal.”The demand curve slopes downward because, ceteris paribus, lower prices imply a greater quantity demanded!

Ceteris paribus (also spelled caeteris paribus; (Modern Latin: [ˈse.tɛ.ris ˈpa.ri.bus]) is a Latin phrase, meaning "other things equal"; some other English translations of the phrase are "all other things being equal", "other things held constant", "all else unchanged", and "all else being equal". A statement about a causal, empirical, or logical relation between two states of affairs is ceteris paribus if it is acknowledged that the statement, although usually accurate in expected conditions, can fail because of, or the relation can be abolished by, intervening factors.

A ceteris paribus assumption is often key to scientific inquiry, because scientists seek to eliminate factors that perturb a relation of interest. Thus epidemiologists, for example, may seek to control independent variables as factors that may influence dependent variables—the outcomes of interest. Likewise, in scientific modeling, simplifying assumptions permit illustration of concepts considered relevant to the inquiry. An example in economics is "If the price of milk falls, ceteris paribus, the demand for milk will rise." This means that, if other factors, such as deflation, pricing objectives, utility, and marketing methods, do not change, the decrease in the price of milk will lead to an increase in demand for it.

In the philosophy of science, there is debate about ceteris paribus statements. In the logical empiricist view, fundamental physics tends to state universal laws, whereas other sciences, such as biology, and social sciences, such as economics and psychology, tend to state laws that hold true in normal conditions but have exceptions: ceteris paribus laws (cp laws).The focus on universal laws is a criterion distinguishing fundamental physics as fundamental, whereas cp laws are predominant in most other sciences as special sciences, whose laws hold in special cases.This distinction assumes a logical empiricist view of science. It does not readily apply in a mechanistic understanding of scientific discovery. There is reasonable disagreement as to whether mechanisms or laws are the appropriate model; mechanisms are the favored method.Another possibility if we assume ceteris paribus in a scenario is the tendency to ignore many important factors that may play even greater roles in the measure of the dependent variable. Some assumptions tend to be highly unrealistic and can lead to wrong beliefs among scientists.