Political Crossfire Forums

[RueTheDay]

LeopardPM wrote: I disagree that gasoline is inelastic in the first place. Not only are there a myriad of substitutes, but, many of its uses can be done without or demanded less (taking Sunday drives, not carpooling, electric furnaces instead of pellet stoves or other fuels, riding bikes instead of driving, etc).

An example of a truly inelastic good might be a glass of water in the desert, etc - beyond that, there are very few, if any, modern day examples.

He didn't say "perfectly inelastic" he just said "inelastic". There is no doubt that demand for gasoline is highly (though not perfectly) inelastic.

[RueTheDay]

Anyway, to answer the original question, an example of a complement (negative cross elasticity of demand) for gasoline would be automobiles. As the price of gasoline increases, the demand for automobiles should in theory decrease. The effect is particularly accute with regard to automobiles with low gas mileage.

[ubikk]

RueTheDay wrote: Anyway, to answer the original question, an example of a complement (negative cross elasticity of demand) for gasoline would be automobiles. As the price of gasoline increases, the demand for automobiles should in theory decrease. The effect is particularly accute with regard to automobiles with low gas mileage.

Or, they might choose a car that uses less gas. This is already happening. Honda and Toyota are seeing increases in sales at the expense of trucks and SUVs.

Some people actually drive less. Particularly poor and people on fixed incomes. When you're out of money at the end of the month, you cant buy any gas until the next check.

We've seen a drop in the 3% annual growth in gasoline usage and soon, if not already, we may see some demand destruction.

[RueTheDay]

ubikk wrote: RueTheDay wrote: Anyway, to answer the original question, an example of a complement (negative cross elasticity of demand) for gasoline would be automobiles. As the price of gasoline increases, the demand for automobiles should in theory decrease. The effect is particularly accute with regard to automobiles with low gas mileage.

Or, they might choose a car that uses less gas.

Do people never finish reading posts before they respond to them?

[ubikk]

RueTheDay wrote:

Do people never finish reading posts before they respond to them?

Frequently they do not. That's why I'm a fan of short posts, with one idea per post. Did you finish reading the entire reply? I discussed the issue of cars with lower gas mileage.

[Brooklyn]

Quote: Anyway, to answer the original question, an example of a complement (negative cross elasticity of demand) for gasoline would be automobiles. As the price of gasoline increases, the demand for automobiles should in theory decrease. The effect is particularly accute with regard to automobiles with low gas mileage.

I understand that cars are a complimentary item to gasoline. Im more interested in how gas prices are influencing the buying habits of people in other areas such as entertainment, retail sales, eating out ect. ect.

However, I don't think hybrid sales will take off until gas becomes even more expensive than it is now. I think I heard somewhere that it still costs less in the short run to buy a regular nonhybrid car. Only the Toyota Prius proved to save the consumer money by year 4 or 5. Maybe someone else could confirm this. So it may be hard to say exactly how much gas prices, right now, are driving up hybrid sales.

[ubikk]

Brooklyn wrote: Quote: Anyway, to answer the original question, an example of a complement (negative cross elasticity of demand) for gasoline would be automobiles. As the price of gasoline increases, the demand for automobiles should in theory decrease. The effect is particularly accute with regard to automobiles with low gas mileage.

I understand that cars are a complimentary item to gasoline. Im more interested in how gas prices are influencing the buying habits of people in other areas such as entertainment, retail sales, eating out ect. ect.


I know it affected me. I took a trip in June out west for two and a half weeks. Because of higher gas prices, we stayed at cheaper hotels along the way than we normally would have and ate at less expensive restaurants to make up the difference. Normally we do Hampton Inn, Mariott, etc. This time we did mostly Motel 6-type places along the way and only stayed at a couple of nice places when we got where we were going in Seattle and SLC. Also bought fewer souveniers and did less shopping than we probably would have. We still made the trip though. We took a large vehicle and the gasoline cost was over $1000.