Editing Ceteris paribus (section)

=== Two uses ===

The above passage by Marshall highlights two ways in which the ceteris paribus clause may be used: The one is hypothetical, in the sense that some factor is assumed fixed in order to analyse the influence of another factor in isolation. This would be hypothetical isolation. An example would be the hypothetical separation of the income effect and the substitution effect of a price change, which actually go together.<ref name=Schlicht1985>{{Cite book |last=Schlicht |first=E. |url=http://epub.ub.uni-muenchen.de/archive/00000003/ |title=Isolation and Aggregation in Economics |date=1985}}</ref> The other use of the ceteris paribus clause is to see it as a means for obtaining an approximate solution. Here it would yield a substantive isolation.<ref name=Schlicht1985 />

Substantive isolation has two aspects: temporal and causal. Temporal isolation requires the factors fixed under the ceteris paribus clause to actually move so slowly relative to the other influence that they can be taken as practically constant at any point in time.<ref name=Schlicht1985 /> So, if vegetarianism spreads very slowly, inducing a slow decline in the demand for beef, and the market for beef clears comparatively quickly, we can determine the price of beef at any instant by the intersection of supply and demand, and the changing demand for beef will account for the price changes over time (Temporary Equilibrium Method).<ref name=Schlicht1985 />

The other aspect of substantive isolation is causal isolation: those factors frozen under a ceteris paribus clause should not significantly be affected by the processes under study.<ref name=Schlicht1985 /> If a change in government policies induces changes in consumers' behaviour on the same time scale, the assumption that consumer behaviour remains unchanged while policy changes is inadmissible as a substantive isolation (Lucas critique).<ref name=Schlicht1985 />