Editing Jevons paradox (section)

==Cause==
{{Main|Rebound effect (conservation)}}
[[File:ElasticDemand.svg|thumb|320px|alt=Diagram showing a shallow demand curve, where a drop in price from $100 to $80 causes quantity to increase from 10 to 14|''Elastic Demand'': A 20% increase in efficiency causes a 40% increase in travel. Fuel consumption increases and the Jevons paradox occurs.]]
[[File:InelasticDemand.svg|thumb|320px|alt=Diagram showing a steep demand curve, where a drop in price from $100 to $80 causes quantity to increase from 10 to 11|''Inelastic Demand'': A 20% increase in efficiency causes a 10% increase in travel. The Jevons paradox does not occur.]]

Economists have observed that consumers tend to travel more when their cars are more fuel efficient, causing a 'rebound' in the [[demand (economics)|demand]] for fuel.<ref name="Small">{{cite journal|last=Small |first= Kenneth A. |author2=Kurt Van Dender |title = The Effect of Improved Fuel Economy on Vehicle Miles Traveled: Estimating the Rebound Effect Using U.S. State Data, 1966–2001 |journal=Policy and Economics | date = 21 September 2005 |url= http://escholarship.org/uc/item/1h6141nj |access-date=1 September 2010 }}</ref> An increase in the efficiency with which a resource (e.g., fuel) is used causes a decrease in the [[cost]] of using that resource when measured in terms of what it can achieve (e.g., travel). Generally speaking, a decrease in the cost (or price) of a [[Goods and services|good or service]] will increase the quantity demanded (the [[law of demand]]). With a lower cost for travel, consumers will travel more, increasing the demand for fuel. This increase in demand is known as the [[rebound effect (conservation)|rebound effect]], and it may or may not be large enough to offset the original drop in fuel use from the increased efficiency. The Jevons paradox occurs when the rebound effect is greater than 100%, exceeding the original efficiency gains.<ref name="Alcott2"/>

The size of the direct rebound effect is dependent on the [[price elasticity of demand]] for the good.<ref>{{cite journal|last1=Chan|first1=Nathan W.|last2=Gillingham|first2=Kenneth|title=The Microeconomic Theory of the Rebound Effect and Its Welfare Implications|journal=Journal of the Association of Environmental and Resource Economists|date=1 March 2015|volume=2|issue=1|pages=133–159|doi=10.1086/680256|s2cid=3681642|issn=2333-5955}}</ref> In a perfectly competitive market where fuel is the sole input used, if the price of fuel remains constant but efficiency is doubled, the effective price of travel would be halved (twice as much travel can be purchased). If in response, the amount of travel purchased more than doubles (i.e., demand is [[price elastic]]), then fuel consumption would increase, and the Jevons paradox would occur. If demand is price inelastic, the amount of travel purchased would less than double, and fuel consumption would decrease. However, goods and services generally use more than one type of input (e.g. fuel, labour, machinery), and other factors besides input cost may also affect price. These factors tend to reduce the rebound effect, making the Jevons paradox less likely to occur.<ref name="Alcott2"/>

As an example of where the paradox did not occur, large improvements in farming productivity (including the [[Third Agricultural Revolution]]) led to lower food prices but did not result in increased demand for food. (Demand for food is inelastic.)  This instead led to lower employment in the farming sector, which declined from 40% of Americans in 1900 to less than 2% in 2024.<ref name=NPR_2025-02-04 > {{ cite news | url=https://www.npr.org/sections/planet-money/2025/02/04/g-s1-46018/ai-deepseek-economics-jevons-paradox | title=Why the AI world is suddenly obsessed with a 160-year-old economics paradox | last=Rosalsky  | first=Greg | newspaper=[[NPR]] | date=2025-02-04 }} </ref>

===Conditions===

The following conditions are necessary for a Jevons paradox to occur:{{ r | NPR_2025-02-04 }}

# Technological change which increases efficiency or productivity
# The efficiency/productivity boost must result in a decreased consumer price for such goods or services
# That reduced price must drastically increase quantity demanded (demand curve must be highly elastic)