Asked by Timyia Thomas on Jul 21, 2024

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The other-things-constant assumption:

A) allows the economist to make useful predictions.
B) is a prediction.
C) applies only to consumers' decisions and not to those of firms.
D) forces the economist to ignore reality,where things are constantly changing.
E) implies rational self-interest on the part of all economic actors.

Other-Things-Constant Assumption

The assumption, when focusing on the relation among key economic variables, that other variables remain unchanged; in Latin, ceteris paribus.

Rational Self-Interest

Each individual tries to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit.

Economic Actors

Individuals, companies, and organizations involved in the production, distribution, and consumption of goods and services.

  • Recognize the significance of assumptions in constructing economic models.
  • Familiarize oneself with the contribution of predictions to economic theories and models.
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Xavier LlamasJul 23, 2024
Final Answer :
A
Explanation :
The other-things-constant assumption, also known as ceteris paribus, allows the economist to isolate the effect of a single variable on the behavior of economic agents. By holding all else constant, the economist can make useful predictions about how changes in one variable will impact other variables without having to analyze every conceivable factor that may affect behavior. This assumption applies to both consumers and firms and does not imply rational self-interest on the part of economic actors.