Introduction to Economics 1 Deneme Sınavı Sorusu #712980
5. Consider the case in which the price of coffee is 5 TL per cup. Individual A’s quantity demanded is 4 cups, individual B’s quantity demanded is 2 cups, and individual C’s quantity demanded is 5 cups. When the price of coffee falls, under the assumption of ceteris paribus, the quantity demanded of the coffee will usually increase. In this case which of the following assumptions can be said to have been made?
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All variables other than the one studied are constant. |
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The quantity demanded is held constant. |
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The price is held constant. |
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Income level of individuals will decrease. |
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Market demand will decrease. |
The Latin term ceteris paribus describes an assumption which allows for a change in only one variable at a time. In other words, when there is a number of different factors that determine an outcome, we assume that only one can change and all the others are held constant. Thus, in this case, the price is changing while the other determinants of demand are assumed to be unchanging. As understood the correct answer is “A”.
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