Final answer:
Ceteris paribus refers to holding all other factors constant when analyzing the impact of price on demand. It simplifies the analysis by considering only price changes, thus in a demand schedule, it considers just the price and excludes other factors. Answer a. It takes only prices into account is correct concerning the demand schedule.
Step-by-step explanation:
Ceteris paribus, or "all other things held constant", is an assumption that simplifies economics by focusing on the relationship between only two variables, typically price and quantity demanded or supplied, by holding all other influencing factors constant. When applied to a demand schedule, the effect of this assumption is that it takes only prices into account and does not consider any other potential changes to demand. Therefore, the correct answer to what effect ceteris paribus has on a demand schedule is: a. It takes only prices into account.
In economic analysis, using the ceteris paribus assumption allows economists to isolate the effects of a change in price on the quantity demanded without the complication of other variables simultaneously changing. This method is crucial for understanding the pure relationship between price and quantity but does not necessarily reflect the full complexity of real-world market dynamics. Therefore, while useful for creating clear models, ceteris paribus does not capture the total extent of market fluctuations.