Quote: You fail basic economics. Gasoline is a nearly perfectly inelastic commodity. - bean
You are incorrect. Gasoline is most certainly not perfectly inelastic. Like most commodities, the total demand is part elastic and part inelastic. This has been historically proven, most notably during the 1970s fuel crisis. As a result of that crisis, Americans began purchasing small, fuel efficient vehicles. The age of the muscle car came to an end.
American most certainly adjust their behavior based on their own selfish interests. When the price of gasoline goes up, SUV sales go down. Yes, Americans will still have to drive to work, but they can choose what they drive.
There is a lag between gas prices and fuel demand because people don't buy a new car just to save on gas money -- after all, cars are expensive. However, the typical American buys a new car every 5 years. This means that half of them will buy a new car within 2.5 years. You can expect a substantial decrease in gasoline demand about two years after a major run-up in prices.
You are incorrect. Gasoline is most certainly not perfectly inelastic. Like most commodities, the total demand is part elastic and part inelastic. This has been historically proven, most notably during the 1970s fuel crisis. As a result of that crisis, Americans began purchasing small, fuel efficient vehicles. The age of the muscle car came to an end.
American most certainly adjust their behavior based on their own selfish interests. When the price of gasoline goes up, SUV sales go down. Yes, Americans will still have to drive to work, but they can choose what they drive.
There is a lag between gas prices and fuel demand because people don't buy a new car just to save on gas money -- after all, cars are expensive. However, the typical American buys a new car every 5 years. This means that half of them will buy a new car within 2.5 years. You can expect a substantial decrease in gasoline demand about two years after a major run-up in prices.