Inelastic Demand for Gasoline
By Arnold Kling
A company called CNW marketing research offers a timely study, as reported on CNN Money.
It would take gasoline prices hitting a sustained $2.75 a gallon to get 19 percent of those surveyed thinking about a more fuel-efficient vehicle; another 7 percent would buy one immediately.
…At $3.25 a gallon, the survey found that about 35 percent thought about buying a more fuel-efficient car or light truck, and 18 percent considered making an immediate purchase of a more fuel-efficient vehicle. It would take gas at $3.75 a gallon to motivate about 40 percent to consider a new car and another 40 percent to make an immediate purchase.
UPDATE: See also Vaclav Smil’s short article, which points out that oil prices are only about 75 percent of their 1980 levels, after adjusting for inflation.
UPDATE 2: See also Steve Hanke‘s claim that oil prices would be $10 lower if we would stop filling the Strategic Petroleum Reserve.
For Discussion. In what other ways might demand for gasoline show some elasticity?