Ceteris Paribus

Reviewed by Annapoorna | Updated on Sep 30, 2020

What Does Ceteris Paribus Mean?

Ceteris paribus is a Latin phrase meaning 'with other things that are same' or 'other things being equal or held constant'. A widespread assumption in the field of economics is that the phrase acts as a shorthand indication of the impact of one economic variable on another, provided that all other variables remain constant or same.

It assists in isolating multiple independent variables influencing a dependent variable. Casual relationships among economic variables are difficult to be isolated in the real world since most economic variables are inter-dependant by more than one cause. Still, the models often depend on an assumption of independent variables.

For instance, in the real world, it would be nearly not possible to ascertain the causal relationship between the price of the goods (dependent variable) and the quantity demanded (independent variable) while also taking into account other variables that affect the price.

Examples of Ceteris Paribus

Let us see few examples of the application of Ceteris Paribus.

The price of meat may rise if more people are willing to purchase it. In turn, the producers may sell it for a lower price if fewer people want it. But prices of meat may also fall if we assume that the price of land to raise chickens also drops.

It makes it difficult to assume that it was only the demand that caused the price change. However, if other variables are kept constant under the ceteris paribus assumption, it is simpler to describe the relationship between only the price and demand. The variables include the prices of similar goods, production costs, and labour costs.

Another example of its application is that ceteris paribus is often used when making arguments about a cause and its effect. An economist might claim that increasing the minimum wage will, in turn, increase unemployment. It will cause a rise in the supply of money, causing inflation. In turn, it reduces the marginal costs that boost economic profits for a company.


Ceteris paribus is also used in other areas, such as psychology and biology. These fields have ceteris paribus rule that is assumed to be true only under normal circumstances.

Related Terms

  • Liquidity Adjustment Facility

    A liquidity adjustment facility (LAF) is a tool used in monetary policy, mainly by the Reserve Bank of India (RBI), which enables banks to borrow money through repurchase agreements (reposals) or banks to lend to the RBI using reverse repo contracts.   Read more

  • Marginal Rate of Technical Substitution

    The marginal rate of technical substitution (MRTS) is an economic theory that describes the rate at which one factor will decrease to be able to maintain the same level of efficiency when another factor rises.   Read more

  • Moral Suasion

    Moral suasion refers to an appeal to morality to change or influence behaviour.   Read more

  • Reasonable Doubt

    Beyond a reasonable doubt is a substantive standard of proof which is required to justify a criminal conviction in most adversarial justice systems.   Read more

  • Supranational

    A supranational entity is an international group or alliance in which member states' power and influence transcend national boundaries or interests to engage in decision-making and to vote on collective body matters.   Read more

  • Business Economics

    Business economics is an applied economics field that studies corporations' financial, organisational, market-related, and environmental issues.   Read more

Recent Terms