The Park Place Economist


The goal of this study is to explain the consumer response to energy price fluctuations in the United States from 1949 to the present time. I will hypothesize that in the United States, the quantity of oil demanded in all areas of the transportation sector is inelastic in the short run, and therefore changes gradually when oil prices fluctuate. In the residential sector, I hypothesize that the quantity of oil demanded will be more elastic in the short run, since natural gas is available as a substitute source when petroleum prices rise. The results of this study can help to determine what types of government policies will be effective in ensuring a positive consumer response to price changes.