The law of demand says that as price of an item rises, the quantity demanded of the item decreases. $4 seems to be the price that Americans sit up and take notice. For the first in years, total gas consumption has actually decreased.
For the first time in my adult life people are serious about conservation. A telling sign, after reigning as the top selling vehicle in America for many years, sales of the Ford F-150 pickup truck fell 30.1% in May (compared to the previous May), and sales of the Honda Civic increased 37.1% for the same time period. Economists call this cross-price elasticity; the amount by which a change in price of one good increases or decreases the quantity demanded of another product. This seems perfectly rational. In his recent article High Fuel Costs Could Spur a New Rationalism,Charles Wheelan (author of The Naked Economist) makes predictions about how the price of gas might affect other goods and services and how it might actually change society in some very real ways. It is worth reading.
Taking Wheelan's argument, how will high gas prices affect value of lakefront property in northern Minnesota?
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