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When economists draw a single demand curve or supply curve using only price and quantity, what assumption are they making about every other factor that could affect buyers or sellers?
AAll other relevant economic factors are held constant
BOnly the prices of substitute goods stay fixed
CGovernment prices are fixed by law at that point
DEvery other factor in the economy is changing too
Answer & Solution
Correct answer: B. Only the prices of substitute goods stay fixed
1. A demand or supply curve plots only two variables: price and quantity.
2. For that two-variable relationship to hold, everything else that could affect buying or selling must be assumed unchanged.
3. Economists call this the ceteris paribus assumption, meaning other things being equal.
4. Option B is too narrow, since the assumption covers income, tastes, and every other relevant factor, not just substitute prices.
5. Option C is wrong because ceteris paribus is an analytical assumption, not a government price rule.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 3 "Demand and Supply", section 3.1 | Demand, Supply, and Equilibrium in Markets for Goods and Services_
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