Question

What is meant by ‘Ceteris Paribus’ assumptions?

Answer 1

The law of demand involves the following ‘Ceteris Paribus’ assumptions:

1. Consumer’s income is fixed and stable.
2. Tastes and preferences of the consumer remain constant.
3. The given price change for the commodity is a normal one, it is not imaginary.
4. Prices of other goods like substitutes and complementaries remain constant.
5. There is no change in the distribution of the community income and wealth.
6. The size of population is unchanged.
7. The level of taxation and other fiscal measures undergo no significant changes.