Another Exception to the Law of Demand

• John Vandivier

Some economists uphold the strength of the laws of economics just like any other science.

I agree and disagree. I think there are some unchanging laws of economics, but not the ones usually discussed. Moreover, I think the often discussed laws of economics should be considered more like usual results, not necessary ones.

A great example is the law of demand. <a href="https://en.wikipedia.org/w/index.php?title=Law_of_demand&oldid=673457392">The law of demand states that, all else being equal, as the price of a product increases, quantity demanded falls; likewise, as the price of a product decreases, quantity demanded increases.

There are well known exceptions to economists including Giffen goods and Veblen goods, but there is another exception which I think is both more obvious and more rigorously defensible. Giffen goods, for example, or not often spotted in the real world so it is a weaker objection to the law.

The obvious exception I think is when a person has a demand of 0. By conventional economic definitions of supply and demand, quantity demanded and price cannot be negative values. If they were then:

  1. The good in question would be a 'bad', which is a weird thing not discussed much in normal economics.
  2. The good in question would be supplied by the consumer as a service, or in other words you would have to bribe them to consume. This is a weird situation because it is not clear whether the consumer is demanding anything other than the bribe, and it appears like the consumption is in fact an input cost to the service rendered at the price of the bribe.
  3. Also, in traditional economics the parameters are positive.
In traditional economics you cannot have less than 0 quantity demanded, but you can have 0 quantity demanded. This makes demand a closed set, but the law of demand depends on demand being an open set.

So epsilon-based calculus proofs of the law of demand fail. This makes the fact that demand can be 0 both a common sense and also a rather rigorous defeater of the so-called law of demand.

I would also argue that 0 demand is an extremely common case in both microeconomics and macroeconomics. It is much more common than Giffen or Veblen goods.

There is in fact an infinite set of goods which are not demanded at either the macroeconomic or microeconomic levels. There are also quite a few goods for which there is some macroeconomic demand but 0 demand with respect to certain persons who have no taste or utility from that good.