Friday, July 20, 2007


Is Gasoline a Giffen Good?

The Economist asks.

I think I know the answer.

Update: What I describe isn't Giffen behavior, Giffen behavior is substituting a superior good with more of an inferior because the increase in price makes the superior good impractical to buy in sufficient quantity. It's a rational behavior, where what I describe is irrational. The Economist has a good clarification.

There no real superior good similar to gasoline, higher gas might cause people to use more to do more work to have gas for their leizure and personal business, but this is highly unlikely and wouldn't have much impact. It's not the same.

[related: What's the Big Deal About Gas Prices]

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