The Invisible Hand -- Still Packs a Wallop

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Years ago I took the Micro Economics class at UCSC -- the Astro 2 of the econ canon. It was therein that I became acquainted with the notion of elastic and inelastic demand curves. These curves plot consumption vs price. An elastic demand is something that one will forgo as the price rises, while consumption of an inelastic demand resists

Comments

[kerryveenstra]

Yes, inelastic demand! Remember the electricity problems around Enron time (and the consequences of a limited supply and a fixed price to consumers?). What silly govt. choices led to that. But I digress.

I've been thinking of "miles per dollar" since $3/gal. The (very useful) truck gets 20 MPG. The price you mentioned is 5 miles per dollar. I use the convenience of Mr. Truck only when needed.

When our govt. decides to reward its oil-addicted citizens for buying vehicles that weigh more than 6,000 pounds (because the domestic auto makers failed strategic-planning 101 and don't have a proper product mix), I have to say, "Hello? Domestic research tax credit for high-MPG cars?" What about a blatant pro-US tax credit on domestically produced high MPG cars. No, that would be smart. That would be the govt. influencing the market to compensate for the market externalities of prices failing to be high enough to get us to make decisions to improve our own economic security.

Will this silliness change? I hope so. Wasn't there a question to Mr. Obama a couple months ago about this? I can't find the quote, but it went something like:

Question: "What can we do about high gas prices?" Obama: (possibly lots of words followed by) "What kind of car do you drive? It's an Escalade, isn't it?" Q: "An Escalade." Obama: (laughs) "I'm sorry, man!"