Quote:
|
Originally Posted by Whiteshiva Actually, there is no certainty in this (small increase in price leading to large decrease in demand), as it all depends on the slope of the curve. I believe one could argue more convincingly that (in the short term) large increases in the price of oil has little effect on demand. Recent history seem to confirm this. |
yes at least in the short term, as I mentioned previously, there is inelasticity, but in the long run, the price elasticity of demand is there. Likewise, price elasticity of demand could be higher for higher price in the short term. This is definitely the case now, businesses are adjusting their output, airlines changing routes etc... as the price has become too high to not adjust the quantity demanded.
Quote:
|
Originally Posted by Whiteshiva For most of us, oil (or energy) is a necessity, not a luxury we can easily do without. Just like basic food, most people are willing to pay quite a bit more to ensure they have enough when supply dwindles. When supply is plentiful, we shop around for the best bargain, and prices drop as a result. |
They will pay more until a certain point. When the price is too high, the price elasticity of Demand will be different, and this is when things start to change.