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Politics : Formerly About Advanced Micro Devices
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To: neolib who wrote (228997)4/12/2005 9:33:33 PM
From: Tenchusatsu  Read Replies (3) of 1572547
 
Neolib, I generally agree with your comments, but don't you see a very non-linear response for price/demand right around the region that has become familiar? Once we are used to $3/gal it becomes no big deal again. But if it were $1/gal, then $2/gal seems terrible, until we become accustom again.

Well of course the "familiar region" will generally be very price inelastic, i.e. minor changes in price have minor effect on demand.

But factor out the fluctuations, and you'll be better able to analyze the effects of price increases. The economy as well as lifestyles will shift to accomodate the changes, but the net effect is that demand for gas will be lower. At a certain critical point, the nation will shift en masse toward hybrids, and we'll see OPEC's power to increase prices negated, at least until the whole nation is hybridized.

Tenchusatsu
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