Transportation
The High Price of Cheap Gasoline
When gas prices stopped falling, Americans again began to drive less.
The most fundamental point in economics is that people respond to incentives. Make something cheaper to buy, and people will buy more of it. Make something more expensive, and they’ll buy less. That’s plainly the case when it comes to driving, and one of the biggest and most visible costs of driving is the price of a gallon of gas.
The relationship between prices and driving isn’t perfect and instantaneous. People make decisions about where to live, how far they’re willing to commute to work, whether to own a car (or a second car), and whether to use various other modes (cycling, transit, and walking) on a long-term basis. But, especially over time, prices influence all of these decisions.