24 May 2008

Greg Mankiw's Blog: Cross-Price Elasticity of Demand V

Greg Mankiw's Blog: Cross-Price Elasticity of Demand V Who has mules? Choices for the average consumer when gasoline prices rise would be: keep buying gas, cut down on driving, buy a bike, or buy a car that's more fuel-efficient. When gasoline prices rise suddenly, then the percent. of income spent on gasoline will rise, and this means that most people will have more difficulty buying a fuel-efficient car. So, I would guess that the price elasticity of demand for gasoline is small.

Brad
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