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Question Description

I will need my initial response to this discussion and then I will need two classmates responses done.

After watching the Section 5.3 Review and Section 6.2 Review videos, respond to the questions below.


Gas prices fluctuate often and in both directions. In your initial post, respond to the following:

  • How responsive do you think consumers will be to the price change when these fluctuations occur due to changes in supply? Why? Use the various determinants of elasticity to explain your answer.
  • How does the price elasticity of demand for gasoline impact the effectiveness of taxes on gasoline aimed at correcting a negative externality?

Consider incorporating the supply-and-demand model to demonstrate the elasticity of demand for gas and to show the effects of tax on the market for gas.

In your response posts to peers, describe in detail how your own actions reflect the ideas shared in the discussion, and relate that to the concept of elasticity.

To complete this assignment, review the Discussion Rubric document.

1st classmate reply needed

3-1: Discussion

Gloria Reboyras posted Nov 9, 2020 5:06 PM

Gas prices fluctuate a lot, but thankfully lately the price hasn’t been so high. Gas is fairly inelastic. There are no substitutes, it is a necessity, and it also takes a good portion of our budgets. Although, overtime gas can become elastic; if people buy fuel efficient cars, or move closer to work (maybe even so close that they don’t need a car), the elasticity of gas will increase. Also, in the short run there are no substitutes for gas, but when you look at the long run, there are many substitutes for transportation, such as carpooling, buses, or biking. This is why in the short run, gas is not elastic, but in the long run it does become elastic. In plain words, if gas prices were to increase, people might try to drive less, or drive on semis butts to reduce their gas usage on the highway (daughter of a semi-driver), but there is not really much they can do about their gas consumption. In the long run though, people can start carpooling groups, buy cars completely based on fuel efficiency, or even buy homes based on it being close proximity to work. Taxes placed to correct negative externalities would not work for gas because it would increase the price of gas, decreasing the supply, but since gas is inelastic (in the short run) the demand of gas would not change. In the long run, gas does become elastic, so it would even out on the supply & demand model later (after people buy fuel efficient cars, or move closer to work). But, that would take a few years of having too high of a demand, and not enough supply.

2nd reply needed for classmate

Discussion 3-1: Elasticity

Holly Watts posted Nov 9, 2020 1:48 AM

According to the basic principles of supply and demand, fluctuations in price due to changes in supply should produce corresponding changes in demand; that is, as supply falls and prices rise, demand should fall, and vice versa. This doesn’t take elasticity into account, however, which can affect consumers’ responsiveness to those fluctuations in price. In the case of gasoline, consumers probably will not be very responsive to price changes due to changes in supply. This is because the demand for gasoline is inelastic. For many of us in the U.S., cars are an absolute necessity, and since most of them rely on gasoline to function, gasoline is an absolute necessity as well. As prices rise, we might try to use a little less, but we can’t stop using gasoline altogether because there are no close substitutes. As prices fall, we might drive a little more, but we’re probably not going to buy significantly more gasoline than before. Taxes on gasoline aimed at correcting a negative externality, namely air pollution from emissions, would probably be less effective than they might be on a good with a more elastic demand. In our textbook (Figure 5.5, page 147), we can see that these taxes are designed to shift the supply curve to the left, which increases prices and decreases quantity demanded. When demand is inelastic, however, the quantity demanded does not decrease as much as one might expect. This means that taxes aimed at correcting negative externalities on goods with inelastic demand would have to be relatively high to change the quantity demanded to the desired point. A better solution might be investment into alternative energy technologies, and cars that run on those technologies.