Why Is the Ceteris Paribus Assumption Important

question 22

Multiple Choice

Why is the ceteris paribus assumption important?

• A) It allows one to separate normative economic issues from positive economic ones.
• B) It allows one to analyze the relationship between two variables apart from the influence of other variables.
• C) It allows one to hold all variables constant so the economy can be carefully observed in a suspended state.
• D) It allows one to generalize from the whole to the individual.

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Definitions:

Reasonable Value

A fair market price or level of compensation that would be deemed equitable under normal circumstances.

Gratuitous Promise

A promise for which no consideration is given or required in return, often unenforceable without a deed or under specific legal conditions.

Consideration

In contract law, consideration refers to the value (such as money, a service, or a promise) that is given in exchange for a contractual obligation from the other party.

Illusory Contract

An agreement that fails to bind one party due to vague or unenforceable terms, making it appear to be a contract only in illusion.