The Law of Demand Works: Gas and Driving Edition

Haha! The Law of Demand works. Price goes up. Driving goes down.


Figure: NYTimes

I repeat: if you want to lower demand for and hence consumption of gasoline, this is the best thing that has ever happened for you. Prices are the most effective climate change abatement policy, and a gas tax holiday is a horrible idea.

Hat-tip: Greg Mankiw

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You are absolutely correct about supply and demand. I have seen more SUV's and large trucks for sale on the side of the if the passersby are completely stupid and will just jump at the chance to buy. This sell off of the hedonistic fuel-hogs plus the reduce usage of fuel will eventually bring prices down...hopefully...until the first major hurricane. Great Post!

Alex ~D~

I bought a motor scooter. As soon as my leg heals (from the last accident), I'll be back on it.

By Paul Murray (not verified) on 03 Jun 2008 #permalink

The problem with having a fuel-efficient car is BUYING it. Between the poor economy and life circomstances, I can only dream about a fuel-efficient automobile while I drive my mother's minivan to work. I feel evil in it, but it's free (besides gas).

If the government took this issue seriously, they'd set up a REAL nationwide public transportation system. Then I could live in todays times without my own vehicle.

For some of us, demand for mileage is really inelastic. While I agree that high prices are provoking more people to get off their asses, I'm just bummed that I still have to drive everywhere becausse no one wants to carpool on a similar schedule to mine nor is there any transit line near my home. Oh, and sine you're into pure pedantry, I'd like to remind you from Economics 1, as price goes up, QUANTITY demanded goes down. The demand curve doesn't actually shift.

I miss living in the Bay Area and taking BART everywhere.

By Rogue Epidemiologist (not verified) on 19 Jun 2008 #permalink