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8 April, 10:24

John is studying the effects of income on the demand for peppers. Which factors are held constant when using the "ceteris paribus" assumption? Select the correct answer below: income all factors affecting demand, except income all factors affecting demand, including income none of the above

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  1. 8 April, 10:43
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    The correct answer is letter "B": all factors affecting demand, except income.

    Explanation:

    "Ceteris paribus" is Latin term meaning "all other things held constant". The term is widely used when talking about fluctuations in supply and demand. In the case proposed, John is studying the effect of income on the demand for peppers other things held constant. That implies John is analyzing how the demand for peppers change when income rises or falls.

    Thus, the only factor changing in John's case is income. All other factors will remain the same.
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