YovngSqvirrel
YovngSqvirrel t1_iuxfhd4 wrote
Reply to comment by 8to24 in Why a Blue check mark is now $8 on Twitter and Elon Musk's Next Steps - A piece of speculative business non-fiction by BandicootKind705
Gas is an inelastic good. You can choose to live somewhere like a city to reduce your personal use of gas, but you would still use the same amount each month, which is what elasticity is talking about. Change in behavior due to price fluctuations. People do not normally move houses due to gas price increases/decreases. And for a majority of people, there is no feasible alternative to driving. The BLS even uses gas as as example of inelasticity.
> Generally, in a recession, income and consumption have a tendency to fall. So despite the economic climate, great changes in price per gallon of gasoline, and the corresponding quarterly variation in dollar expenditures for gasoline, households still consumed the same amount of gasoline. This steady consumption indicates that households did not dramatically change their behavior in response to changes in gasoline prices. Instead of a shared road trip with friends, biking instead of driving, or other consumption changes in response to price increases, people likely continued their gas-consumption habits. Something about gasoline is different than other goods that create this static consumer behavior.
https://www.bls.gov/opub/btn/volume-5/using-gasoline-data-to-explain-inelasticity.htm
YovngSqvirrel t1_iuxi5vg wrote
Reply to comment by 8to24 in Why a Blue check mark is now $8 on Twitter and Elon Musk's Next Steps - A piece of speculative business non-fiction by BandicootKind705
A good's price elasticity of demand is a measure of how sensitive the quantity demanded is to its price. When the price rises, quantity demanded falls for almost any good, but it falls more for some than for others.
The fact that millions of people don’t use gas has nothing to do with price elasticity. Are you buying more gas when it becomes cheaper? Are you buying less gas when it is expensive? No. So the good is inelastic.