Elasticity Of Gasoline

An increase in gas taxes won’t do anything to change people’s habits. Do people stop driving to work, quit their jobs or sell their house for them to move closer to work? I guess not! Increase gas prices do nothing but only give the government more of taxes out from our hard earned money. There are dozen ways to cut back on fuel consumption in response to its high cost to name just a few: carpooling, going to the mall or wet market among others. What we are really debating is the price elasticity demand for gasoline? Is it zero? Or what happen if gasoline rises 10% does consumers buy less or more. We will not be playing guessing games but instead we will study and determine what price elasticity of demand for gasoline based on some valid variables.

One study is explaining the distinction in elasticity estimate of gasoline demand in the United States: One of Meta analysis conducted by Mooly Espey which is published in the Energy Journal, which he examined 101 different studies and found that in the short-run (which is defined one year or less), the average price elasticity of gasoline demand is -0.26. That is a 10% rise in the price of gasoline lowers quantity demanded by 2.6%. In the long run (defined as longer than 1 year), price elasticity of demand is -0.58; a 10% hike in gasoline causes quantity demanded to decline by 5.8% in the long

While the short run price and income elasticities of gasoline demand in the United States have been studied extensively, the vast majority of studies focused on consumer behavior in the 1970s and 1980s. There are a number of reasons to believe that the current demand elasticities differ from prior periods, as transportation analysts have hypothesized the behavioral and structural factors over the past several decades have changed the responsiveness of US consumers to changes in gasoline