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The Elder Scrolls V: Skyrim Hints
Exactly how does the difficulty setting affect gameplay?
1 of 6: It only affects the damage multipliers used during combat. Whenever you attack someone or someone attacks you, the damage multipliers are used to determine exactly how much damage is done.
2 of 6: On the default difficulty setting (adept), both of the damage multipliers are 1x. That means you and your enemies will do regular damage to each other.
3 of 6: On lower difficulty settings, the multipliers change to make things easier for you. On the lowest (novice) setting, you'll be doing about 2x (double) damage to enemies, and they'll be doing 1/2x (half) damage to you.
4 of 6: The highest difficulty setting (master) does the same thing in reverse. You'll be dealing half damage, and your enemies will be doing you double damage.
5 of 6: Note that unlike in Oblivion, the damage done by followers, summoned creatures, and poisons is also subject to the multipliers. This means they'll be less effective on higher difficulty settings (though they'll still be very helpful).
6 of 6: If you want, you can change the combat multipliers using the PC console. See the PC Cheat Codes' "Altering the Difficulty Settings" section for all the details.