Heavy Lifting - thoughts and web finds by an economist
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Wednesday, January 28, 2009
An interesting question is asked in the January 28, 1909 NYT:
To the non-economist this might seem perplexing, but my answer to the mystery was that the individual's demand for gas was (slightly) elastic. Thus, when the price of gas fell they consumed more gas so that they actually spent more than before.
Another interesting fact was that the price of gas had been regulated to be $0.80 per unit and this, in turn, actually increased revenues for the gas company. As we don't know the costs of the gas companies, we don't know if their profits increased. However, I would assume that profits fell because otherwise the price of gas would have been $0.80 without the need for regulation.
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