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Comment by pmarreck | Hacker News Reader

So the cost of electric cars tripled (due to a near-200% import tax imposition) and it only dropped sales to 1/3 what they were? The fact that this didn't wipe them out entirely is telling

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The article describes the tax changes as a phase out, from 2016 (presumably late in the year since the changes were made in 2015) to 2020.

The prices did not immediately triple.

Triple price and 1/3 quantity directly follows the linear demand curves they teach in Economics 101.. not sure what else you were expecting.

Linear doesn't mean slope = -1, though.

Also, you can fit just about anything to two points.

Hey, that's an interesting question: is there anything you can't fit to two arbitrary points?

Seems like with compression, x/y offsets, and rotation you could fit just about curve.

A single point

In general on the plane, you can fit a polynomial of n-1 degree exactly to n distinct points (i.e. it will pass through those points)

This least to an easy way to demonstrate the evils of over-fitting :)

And there is exactly 1 polynomial of degree n-1 that will match n points ;)

It's true! I somehow missed a "unique" there, too late to edit.

There is no reason why that demand curve should be linear and often isn't.

And in economics 102 they teach you that price elasticity of demand is rarely if ever at unity, and it's not generally even a linear function. For a good like Tesla, this is especially true, because income distribution is close to a normal distribution, not a uniform one (which is the circumstance where you would expect to see linear price elasticity of demand).

That's not even Econ 102, that's.. week 4 of Econ 101.

And in the real world you learn that price elasticity is a suggestion rather than a law.

It's probably a law of nature that prices won't stabilize somewhere where you could triple the price and sell 1/3 the quantity. At the higher price, revenue would be the same, but you only had to produce 1/3 of the goods, so profit is higher.

So if you were ever in this situation, you would probably expect price to rise until the slope of the demand curve changes.

> Triple price and 1/3 quantity directly follows the linear demand curves they teach in Economics 101.. not sure what else you were expecting.

It doesn't follow a linear demand curve, because we only have two data points (any two points can define a line, so we'd need at least one more to estimate the second derivative).

Furthermore, linear demand curve doesn't mean that the price elasticity of demand is 1 - and in fact, unit elasticity would be quite surprising, and it would generally not be desirable for Tesla[0].

But finally, Economics 101 classes don't teach linear demand curves. Every introductory economics textbook I've seen draws them this way because it's easier and it doesn't change the math at the introductory level, but every single one also introduces the concept with an indicator that it's drawn this way for convenience, not because they are teaching linear models.

[0] You can come up with somewhat exogenous reasons for wanting to operate in the unit-elastic or inelastic portions of the demand curve, based on the venture model of optimizing for brand penetration, but it's not the place that they'd financially be able to or want to operate in the long run.

Right. Increase price and introduce pricing/cost uncertainty, and you have fewer buyers. Sounds about right to me. Sounds like Econ 101 to me as well. When someone dresses up info from a 101 level college course as a headline, it says to me either, "slow news day" or "hit piece."

The prices rose around 20% and only for the more expense ones. Apparently that was enough to stop the sales immediately.

All the media fuss was about dropping the tax-exemption completely. As I remember, you had to read the news about it very carefully to see that they did a gradual phase-out of 20%/yr or so.

It actually turned out that the change caused the EV sales all but stop completely (quite to the surprise of the tax authorities). So they're looking at re-exempting a few thousand cars every month.

Fun fact: The danish nickname for the tax authorities is "Skattefar", "Taxdaddy" - and it's the name of their twitter account: https://twitter.com/Skattefar

Probably people knew about it and bought their cars before the 20% tax increase

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