Due to the low elasticity of the gasoline market, price changes have little impact on consumer demand. The sensitivity of demand to price changes is measured by price elasticity.
Exactly how elastic is gasoline?
- Due to the low elasticity of the gasoline market, price changes have little impact on consumer demand. The sensitivity of demand to price changes is measured by price elasticity.
- In the past, Americans' gas use has been somewhat inelastic, which means that price increases haven't really had much of an impact on it.
- Regarding fuel, this is especially true. In the first several months after a fuel price increase, the amount of fuel demanded barely changes. Fuel demand may therefore be quite inelastic in the short term. Oil demand, though, might be more price elastic in the long run.
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