Problem

In an analysis of the market for paint, an econom…

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Problem 2 Medium Difficulty

Why do economists use the ceteris paribus assumption?

Answer

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Principles of Microeconomics for AP® Courses

Chapter 3

Demand and Supply

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Jessica A.

January 13, 2021

When the producers are producing higher than the equilibrium point, consumers will want to paya lower price for the good - as the volume of production has increased. However, producers willwant to increase the goods price for the same reason. When this oc

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Video Transcript

All right, so we're doing question number, Que, um and I was very poor looking, too. That's still bad, but whatever. Um weird question number two, which is asking, why do economists to use the terrorist pair of this assumption? And as you can read, Sedaris, pair of this is Latin for ah, all other things being held the same, um, and good. It's a good question why it's used on dhe. It's best to think of it through an example. So let's look at a supply and demand for apples. Apples may have our price of here and our quantity down here. Um, and you know, there's your supply curve and there's your demand curve. And the question you're asked is, for example, what's gonna happen to supply demand if Johnny Appleseed goes in plants. 1,000,000 new apple trees? Well, if he's playing two more apple trees, there gonna be more apples. So supply's gonna shift right. And economists would ask, what what happens to equilibrium, price and quantity, and you can see quantity increases, price falls and all other things being held the same. You could say with with conviction that this is true. But if all your things weren't held the same. You couldn't say this with conviction because, you know, maybe for exact example, there would be a really bad recession. Maybe, um, if there's a recession and demand would shift, which, if down, uh And you know what, This new equilibrium, where it looks like prices obviously lower and quantity is also slightly lower. And so you won't be ableto say anything about How about Johnny Appleseed? Planting 1,000,000 new trees is gonna affect anything because those things could be changing one way or the other that would be affecting it. Whereas if you were using this principle of all other things being held the same, you could say with conviction that Johnny Appleseed planting 1,000,000 new trees will definitely increased quantity and decrease price because all their things were being held equal

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