Article Review - Economic Journal Titled “the Demand for Automobile Fuel, a Survey of Elasticities”

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level of income. This is because the purchase of car will take either small or large proportion from the person income. Thus, this will affect the elasticity of fuel demand as we know that car and fuel are complementary products. In the long run, the elasticity for fuel is considered elastic whereas in the short run the elasticity magnitude is lower than in the long run.

3. Comments

Findings from the study can benefit us in knowing the response of behaviour of people with respect to changes in price of fuel. Looking into detail, we can examine the response in the short run and long run elasticity.

With a clear understanding of the behaviour of the people in the fuel demand with regard to price, we can determine the elasticity of the complementary product for fuel such transportation. This is important for the car manufacturer in designing their products in term of fuel consumption with respect to response of the customer to changes in the price. As we can see nowadays, people more prefer to the car with less fuel consumption. The car manufacture may use the information of the elasticity to arrange the strategy of their product.

From the paper we can see that the price of fuel will affect the use of the fuel in terms of volume. However, as we know that fuel is complementary product of car, any increase in the price of the fuel will bring negative effect to the demand for car. Thus, increase in the price of fuel will makes people to use fewer cars or economize the use of car. From this perspective, we can see that least car used on the roads will help in minimize the traffic congestion.

Fewer cars being used on the road also help in conserving our environmental health. As we know that, car that rely on gasoline releasing the carbon monoxide in which leads to negative effect such as greenhouse effect. Thus, one of steps in maintaining green environment is through increasing the price of the fuel.

This information is crucial especially for the government in order to maintain the environment in healthy condition. For an issue like air pollution especially ones that triggered from the use of fuel, we need to solve from the major sources. This is why government has been actively in promoting the car pool campaign. However, the campaigns are not success as expected. In future, the information regarding the fuel price elasticity may become references in solving the problems.

References

Biello, D. (18 April, 2007). Want to Reduce Air Pollution? Retrieved 29 November, 2015, from Scientific American: http://www.scientificamerican.com/article/reduce-air-pollution-do-not-rely-on-ethanol/

Daniel J. Graham, S. G. (2002). The Demand for Automobile Fuel: A Survey of Elasticity. Journal of Transport Economics and Policy, 1-26.