The Latin phrase ceteris paribus translates to “all other things being equal.” In economics, it allows us to isolate the effect of one variable while assuming that everything else stays the same. It’s like turning off all the lights except one to see how that single light affects the room’s brightness.
Economies are complex, with many factors interacting simultaneously. Ceteris paribus lets economists:
Without it, every prediction would be muddled by countless other variables.
Imagine you’re a chef testing a new recipe. You change the amount of salt while keeping all other ingredients and cooking conditions constant. The taste change you observe is due to the salt alone—this is ceteris paribus in action. If you also changed the oven temperature, you couldn’t tell which factor caused the taste difference.
Consider the demand curve for coffee. If the price of coffee rises from \$3 to \$4, the quantity demanded might drop from 100 cups to 80 cups. Ceteris paribus means we assume:
Under these assumptions, the only reason for the drop is the price increase.
| Variable | Assumed Constant (Ceteris Paribus) |
|---|---|
| Price of Coffee | Income, substitute prices, preferences, etc. |
| Quantity Demanded | Same as above. |
Remember: When you see a question asking you to explain the effect of a change, always state the ceteris paribus assumption. It shows you understand that the relationship is conditional on other factors staying constant.
Suppose the government imposes a tax on sugary drinks, raising the price from \$1.50 to \$2.00. Under ceteris paribus, what happens to the quantity demanded? Write your answer in one sentence and explain the assumption you’re making.