DOWNWARD SLOPING DEMAND CURVES….Megan McArdle:
The cable news shows this morning were full of wide-eyed anchor larvae reporting that with gas prices high, people were driving less, and instead using more public transit! Oh, for a land in which the downward-sloping demand curve was not such a constant source of surprise and wonder to the broadcast media.
Besides, it might not even be the price of gas that’s responsible. Gasoline consumption does fall during recessions, and that might have as much to do with the recent reduction in driving as prices at the pump.
More generally, though, sure, demand curves slope downward. But that’s the starting point of any serious discussion, not a devastating comeback that ends it. If the slope is very mild, as it seems to be with gasoline consumption and minimum wage labor markets, for example, there might be other factors at play that introduce enough real-world noise to flatten out the curve over part of its range. It’s an empirical question, not an ideological one, and there’s no way of knowing for sure except by looking at the data.