Interrelationship between different-size cars and gasolines: a household-production approach
This thesis is an applied microanalysis investigating the ability of a systems-wide demand model to explain the relationship between fluctuating gasoline prices and the demand for different-size cars. The model's assumptions provide a consistent method for specifying variables to include in the empirical estimation. The mathematical properties of the derived demand functions are consistent with the foundations of neoclassical consumer-choice theory. Slutsky symmetry restrictions applied to the matrix of estimated cross-price coefficients are tested for statistical validity. The results supports the assumption that consumer choice is consistent. The model first estimates the demand for transportation and then estimates the relative demand for its inputs. The empirical results are enlightening. Results indicate that consumers view autos as a whole to be specific substitutes for gasoline. Rising gas costs should ceteris paribus increase the demand for autos. Thus, the decline in automotive sale that occurred after the two energy crises of the 1970s is more a consequence of the general rise transportation costs than the specific rise in gasoline prices. The estimation of the demand for different size cars reveals that gasoline prices impact the composition of demand for autos. Consumers view small and mid-size cars as specific substitutes for gasoline, full-size cars as specific complements.
- Research Organization:
- Utah Univ., Salt Lake City (USA)
- OSTI ID:
- 5295479
- Country of Publication:
- United States
- Language:
- English
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AUTOMOBILES
DEMAND FACTORS
FUEL ECONOMY
FUELS
GASOLINE
LIQUID FUELS
MARKET
PETROLEUM PRODUCTS
PRICES
SIZE
VEHICLES