Ceteris Paribus

Question 1

Ceteris Paribus

Answer 1

All other things remain unchanged

e.g. If price increases quantity demanded should fall, ceteris paribus

Used because IRL any change in an economic variable is likely to cause a change in others

Question 2

Classical economics assumptions - Homo Economicus

Answer 2

Homo economicus is the assumption made in classical economics that individuals are always rational and act in their economic self-interest. That firms are profit maximisers and consumers are utility-maximisers. This is not always the case (see behavioural economics).