Jevons Paradox:
The Jevons Paradox has resurfaced in economic discussions after the DeepSeek AI launch led to a selloff in global tech stocks, raising concerns over AI chip demand.
- Jevons Paradox states that when a resource becomes more efficient and cheaper to use, overall consumption increases instead of decreasing.
- Proposed by William Stanley Jevons in 1865, observing that improved coal efficiency led to higher coal consumption instead of savings.
- Factors Influencing Jevons Paradox:
- Cost Reduction: Lower usage costs drive higher demand.
- Increased Accessibility: Efficiency makes resources more widespread.
- Economic Growth: Higher productivity spurs industrial expansion.
- Elastic Demand: When demand is highly responsive to price changes, consumption rises sharply.
