lecture_gasoline_policies_lec2_fall2011

lecture_gasoline_policies_lec2_fall2011 - Policies...

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Policies Targeting Gasoline Pricing Energy Economics and Policy ECON 489/689
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2 New Topic: How Do Consumers Respond to Higher Gasoline Prices? Short-run: Change # miles driven Longer-run: Purchase more fuel efficient vehicle Evidence from: ”Pain at the Pump: The Differential Effect of Gasoline Prices on New and Used Automobile Markets” by Busse, Knittel and Zettelmeyer”, 2011
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3 Raw Data MPG OF NEW CARS AND GASOLINE PRICES OVER TIME
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4 How Does Rise in Gasoline Price Affect New and Used Car Demand? Raises usage costs for all cars For most customers, demand for cars as a whole will be inelastic to gasoline prices (lack of good transportation alternatives) A gasoline price increase should: Increase demand for fuel efficient cars Decrease demand for fuel inefficient cars Should hold for both new and used cars
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5 Their Data: Auto Transactions & Gas Prices
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6 Results for New Cars (by segment) A $1 increase in price of gas…
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7 Results for Used Cars (fuel economy quartile) A $1 increase in price of gas…
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Thought Question How can changing gas taxes affect fuel economy vs. fuel economy standards?
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This note was uploaded on 02/20/2012 for the course ECON 489 taught by Professor Nelson during the Fall '08 term at Texas A&M.

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lecture_gasoline_policies_lec2_fall2011 - Policies...

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