As gas goes up, driving goes down — which should surprise no one:
Compared with March a year earlier, Americans drove an estimated 4.3 percent less — that’s 11 billion fewer miles, the DOT’s Federal Highway Administration said Monday, calling it “the sharpest yearly drop for any month in FHWA history.” Records have been kept since 1942.
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According to AAA, the national average price for a gallon of regular gas rose to a record $3.936. That compares with an average price per gallon of $3.23 last Memorial Day.
That’s a 22-percent increase in gas prices leading to a 4.3-percent decrease in miles driven — which might imply a slightly more than 4.3-percent decrease in gas consumption.
Sure enough, the price elasticity of gasoline demand is relatively inelastic, at 0.2. But we already knew that.