The take away:
Even still, this thinking has its own flaws. As soon as demand returns to what it was prior to the protest, the point of equilibrium between supply and demand will rise once more, in turn causing the price of gas to rise to what it was before the protest took place.
I appreciate the intentions of the protest. Unfortunately it will serve no purpose in the end other than to inconvenience you as a driver and a consumer.
And yes, I agree.
To add my own bit of commentary, it’s important to remember that while the price oil is changed by our demand, OPEC operates as a cartel and strives to affect the world price of oil. That is to say, OPEC has the ability to tighten its production and increase price. I believe that's what happens when the demand for a good is inelastic.
1 comment:
Hey Mike, thanks for taking a look at my blog and commenting on it here. I thought about emailing you the link, but I know you use Google Reader and might come across it anyway.
Good addition regarding the ability to tighten production. Doing so would enable a static price to be maintained via decreased supply in the case that the demand should manage to drop on a permanent basis.
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