Suppose two people, Mike and Sharon, are standing ten feet away from each other. Mike walks five feet towards Sharon.

Question: Is Mike now five feet away from Sharon?

Answer: Maybe. It depends.

In the time that Mike spent walking, Sharon could have done an infinite number of things. She could have walked five feet towards Mike, in which case they would be right in front of each other. Sharon could have ran away screaming because Mike looks like an ax murderer and she has no idea who he is, so now she’s more than five feet away. Sharon could have been transported into an alternate dimension in which case she no longer exists anywhere close to Mike. The only way we could know with absolute certainty if Mike is five feet away from Sharon after he walks forward is if we assume that the only variable that changes is Mike. In other words, we restrict everything else to be fixed and assume that all else is equal.

If it’s so difficult to figure out the end result of this simple example, imagine just how much more difficult it is to predict everything else with all the random variables of life. It would be impossible to study economics. To make things easier, economist employ a simplifying assumption, ceteris paribus which is Latin for all else equal into all their models. This allows us to see the results of changing one variable at a time, giving us more definite answers. The more we keep constant, the more certain we are about the outcome.

It’s a minute, but important detail that you’ll be seeing pop up everywhere. Also, professors love to use this to trick students during exams, so watch out for it. But hey, at least now you’ll have something new to talk about at your next party. Although, if this is the most interesting thing that you have to say, you might want to start looking for different parties to go to.
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