Friday, January 28, 2011

More on Gas Prices

When gas prices increase we consume less oil. The law of demand holds. I've said this before, by being dependent on oil (domestic or foreign oil) we will leave our economy exposed to sudden shocks in oil prices. The solution, decrease the quantity demanded of oil. How? By raising prices.  Higher gas prices, means less oil consumed as households buy more fuel efficient vehicles and creates the incentive for firms to develop new energy technologies.

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