Topics
Perverse demand curve
A perverse demand curve is one which slopes upwards from left to right. Therefore, an increase in price leads to an increase in demand. This may happen where goods are strongly affected by price expectations.
A perverse demand curve, also known as a Giffen good, is a type of economic relationship in which an increase in the price of a good leads to an increase in the quantity demanded. This relationship is the opposite of the normal downward-sloping demand curve that is typically observed in economics, in which an increase in price leads to a decrease in the quantity demanded.
Perverse demand curves are relatively rare, but they can occur in certain situations where the good in question is considered a necessity and has few close substitutes. For example, a household that is struggling to afford food may be willing to buy more of a staple food item, such as rice or bread, if the price increases, as they may view it as a necessity and be willing to cut back on other expenses in order to afford it.
It is important to note that the concept of a perverse demand curve is somewhat controversial in economics, and some economists argue that these relationships may not occur in practice.
-
What is a perverse demand curve?
Study Notes