Upward-sloping Demand?

Lynne Kiesling

Tyler Cowen has an intriguing post with a “Humean” thought experiment: what if demand curves sloped upward? How quickly would the economy unravel, and who would be the first to notice? In the comments, AZ gets to my first thought upon reading the question: depends on the relative positions of the demand and supply curves (assuming supply curves still slope upward).

Tyler obliquely asks what our electric power wholesale markets would look like, and how they would behave. Thinking about electric power in this freaky world highlights a truth that would apply to all goods: ultimately, physical constraints will bind. Uncoupling the relationship between price and scarcity does not change the physical reality of resource constraints. Anyway, do go read the whole thing.

Bonus points: what makes this a “Humean” thought experiment?

3 thoughts on “Upward-sloping Demand?

  1. Kent,

    Very good! And record time, may I add. Marks off for incompleteness, though: his Enquiry? Enquiry into what? Assume your reader is not as well-read as you are.

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