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    Ceteris paribus and comparative statics

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    Ceteris paribus and comparative statics are commonly vehicles for economic analysis. Explain using the dramatic, large scale expansion of soy bean purchases by China (2003, 2004 and beyond).

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    Please refer to the attachment.

    comparative statics: The technique of comparing the equilibrium resulting from a change in a determinant with the equilibrium prior to the change. Comparative statics is the primary analytical technique used in the study of economics. A popular example of this technique is found in the study of markets. Comparative statics is used to analyze how the equilibrium price and equilibrium quantity are affected by changes in the demand and supply determinants, which are graphically represented by shifts of the respective demand or supply curves.

    ceteris paribus: A Latin term meaning that all other factors are held unchanged. The ceteris paribus assumption is used to isolate the effect one economic factor has on another. Without this assumption, it would be difficult to determine cause and effect in the economy. Relaxing the ceteris paribus assumption is the primary analytical technique used in the study of economics, especially for when analyzing the market. Much like a chemist adds one chemical at a time to a mixture to determine the resulting reaction, an economist relaxes one ceteris paribus assumption at a time to observe the results.

    The case:
    China has also experienced a resurgent economy for the past several years. This increase in income gives the Chinese more money to spend on soybean oil-based products.To address this shortened supply and increasing demand, the soybean checkoff, ...

    Solution Summary

    Ceteris paribus and comparative statics are applied.