For a link to the latest in the oil market, check up USA Today reporter, Barbara Hagenbaugh's latest article in USA by following this link: http://www.usatoday.com/money/industries/energy/2007-09-11-opec-oil-production_N.htm
My comment posted earlier today was: If big oil is a monopoly, then big oil would have the incentive to make as much money as possible. In the econ world, when a company lowers the price for a good like oil and total revenue increases, the good is considered elastic. But the price is INCREASING and total revenue is going up. This must mean that the good is inelastic. No monopoly would set the price on the inelastic portion of their demand curve since it wouldn't maximize profits. Given that the price of gas has gone down as well as up, the oil market must be competitive and simply reacting to supply and demand fundamentals.
I think the government should subsize electric/hybrid car companies. With a subsidy there will be more hybrid cars produced at a lower cost and more consumers will buy them because of the lower cost. Because more consumers buy hybrids this will decrease the demand for gas and the price will go down as well as the quantity demanded. Because of this consumers will now have cheaper cars that use less gas that comes at a cheaper price, no?
ReplyDeleteI'm all for hybrid cars and would buy one at a cheaper price. I'm not sure that a subsidy would be the answer. This summer I studied the costs and benefits of subsidies and found that subsidies misallocate resources...would you look at some of older posts and tell me what you think?
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