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JBriggeman
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JW, a demand curve is a representation of the relationship between price and quantity demanded. It slopes downward because there is a strong ceteris paribus assumption: 'What happens to quantity demanded, in a given context, if you vary only price?' Come then you and Nick to state, openly: 'Yes, but what if the expected quantity to be purchased ALSO changes?' Well, when we vary something other than price, that's when we talk of curves shifting, not of their slopes. A distinction without a difference? It makes quite a bit of difference whether you and Nick have discovered something that runs counter to a purported law of economics or not. Are we discrediting micro or just putting it to use, here? When you invoke technical concepts such as "demand curves" and their "slopes," forgive folks for presuming you are not here just to wave your hands.
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*in first paragraph, should be "not that the 'market demand curve slopes upward'" of course
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Hi, Nick, I think most microeconomists would say you are suggesting the policy change would shift both the supply and demand curves, not that the 'market demand curve slopes downward' (I think they would say it is definitional that the market demand curve is the summation of individual demand curves). Perhaps the case you present is similar to the commonly discussed case of changed expectations about future prices, which is represented in micro as causing a shift in the demand curve. If so, it could be represented by microeconomists as a case of changed expectations about future quantity traded: The policy change leads everyone to think quantity traded in the city will be higher in the future than they had thought, and as a result their current demand for housing in the city shifts upward.
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Sam Peltzman made some similar points in his contribution to the "Why Is There No Milton Friedman Today?" symposium in Econ Journal Watch.
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Jan 19, 2015