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irina [24]
3 years ago
10

why do economics often use the other things constant assumption when they develop econonmic theories?

Business
1 answer:
sineoko [7]3 years ago
3 0

The Latin word "Ceteris Paribus," often used in Economics simply means, with other things being the same or all things being equal.

The major reason why economics often use "Ceteris Paribus" is to eliminate other factors which might complicate an outcome.

For instance, If the price of pork increases, people will purchase less pork, that is Ceteris Parabus. In this instance, ceteris paribus means that the possibility of other factors affecting the sales of pork will not be considered. Other factors such as an announcement were made that pork causes cancer, or the price of Chicken has increased, thereby making pork the best alternative, hence, all these other factors will not be considered, therefore in this situation, economics only wants to consider what happens if the price of pork rises while keeping all other factors the same.

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Answer:

D. Credit for $2.5 million

Explanation:

The depreciation expense to be recorded in the subsidiary individual accounts in respect of equipment is given below:

Depreciation expense to recorded in subsidiary accounts=$40 million/10

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Since for the consolidated accounts we consider the fair value of the assets of the subsidiary and not the book values of assets, so for the purpose of consolidation, the depreciation expense of the equipment shall be recorded based on its fair value and not its book value in the following manner:

Depreciation expense to recorded in consolidated accounts=$15 million/10

                                                                                                 =$1.5 million

Effect on consolidated depreciation expense= depreciation expense recorded in subsidiary accounts-depreciation expense recorded in consolidated accounts

Effect on consolidated depreciation expense=$4 million-$1.5 million

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So based on the above calculation, the answer is D. Credit for $2.5 million

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