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Definition of Ceteris Paribus. Ceteris Paribus is a Latin phrase meaning âall other things remaining equalâ. The concept of ceteris paribus is important in economics because in the real world it is usually hard to isolate all the different variables.
Ceteris paribus, the more price inelastic the demand for the commodity, the bigger the proportion of the tax paid by the consumers and vice versa. The imposition of a tax on the commodity (or even on the factor of production) translates into increased costs of production for the producers.