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Comment by sumtechguy | Hacker News Reader

It is interesting they consider it a paradox. When the demand curves show it. As making something more efficient moves the supply curve around (and moves where MR=MC is). Or in econ 250 class speak 'shift the supply curve right'. I think the 'paradox' comes in where they do not consider there is more demand on the other side of lower prices? Not all goods goto infinity on cost vs demand curve. But some sure act like it.

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In urban planning there's the 'law of induced demand' that has parallels to this and shows the paradoxical nature. When a road starts to see congestion, the reaction in the past has been to add lanes, widen the road, and/or increase the speed limit to get more cars through faster. This has its intended effect in the short term, but makes the road more attractive to drivers. More drivers start using the particular road, exceeding the planned capacity and in the average case causing worst congestion than existed before.

I guess the "paradox" or counterintuitive part comes in situations when the price elasticities are such that a 10% efficiency gain (or price cut) would result in >10% increase in demand and hence in final spending.

Another part may be that non-economists (and even lots of students who succesfully passed econ 101) don't think about shifting demand or supply curves. In my experience, most people who remember the textbook supply-demand curves only think about moving along the curves (which makes the classic diagrams pretty crappy pedagogical devices IMO).

agreed. 1 to 1 would be an interesting result and probably a linear set of curves. But some curves look more like log scales so the effect depending on the slope of the curve could be wildly more or less.

I agree the classic diagrams are kind of crappy. As usually they are very simple just for demonstration. But to make both of those curves is usually more like a N dimensional curve. But remembering back on my econ classes I took they were excited about point slope formulas and maybe a mix of linear algebra in the advanced classes. Which was amusing from the CS/Math background which was my major.

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