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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: patron_anejo_por_favor who wrote (2955)3/26/2004 5:14:12 PM
From: CalculatedRisk  Read Replies (1) of 116555
 
You are correct. The common wisdom in the 70s was that demand for gas was inelastic with regards to price.

This was proven to be incorrect. Demand is fairly inelastic in the short term, but is actually reasonably elastic over a few years. If prices hold at the current level (or increase), I expect the sales of large SUVs to drop off.

Two more comments: 1) Preference surveys are notoriously inaccurate. 2) If 1/3 of all SUV buyers (that is a huge margin) bought more fuel efficient vehicles, that would have a major impact on the auto makers.
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