Quote:
Originally Posted by Dan02
It might not be perfectly inelastic but it's definately relatively inelastic. The big drop in your graph only shows a 10% drop from peak and about 5% drop from average. And wouldn't that graph make more sense for analyzing elasticity if that was price vs demand rather then demand over 2 different years?
Be interesting to see a graph of Canadian demand as in the last few years the price of gas has almost doubled yet i don't think demand has changed much.
|
I agree with you that demand for transport fuels, specifically gasoline, is inelastic... in the short-run.
However, over the medium to long-run, demand should be elastic as people make decisions that will limit their consumption of gas if the price is high enough. For example, people will replace their cars after their current car has expired with an efficient vehicle, people will choose their homes closer to their work or on transit lines, and people will daisy chain their errands to make less car trips.
The evidence from Europe over the 90s and 2000s is that higher gas prices have, infact, led to less consumption.
But I would agree, right now demand is inelastic but not totally inelastic as we have seen that Americans drove less kms over this summer than last and total consumption of gas dropped (I think) in the wake of high gas prices.