Chapter 2: The Operation of a Market

Falling gas prices up SUV sales

http://abclocal.go.com/wabc/story?section=resources/traffic&id=7038986#bodyText

|Summary|
As gas prices are falling, more Americans are going back to buy bigger vehicles which are not new fuel-efficient hybrid rather, gas-guzzling SUV and trucks. As stated in the article, with the price of gasoline dropping, dealers report sales of SUVS and trucks are up at least 9 percent, according to one national study. The Cash for Clinkers program aimed at spurring sales of fuel-efficient cars while getting older models off the road had recently ended. Motorists say there’ll always be a market for sport utility vehicles. Dealers say expect more so-called crossover vehicles, which could help soften the blow if gas prices start to go back up.

|Connection|
Under most circumstances, consumers will buy more of a product if the price is low and less of it if the price is high. If the price of a product increases, less of the product can be purchased with the current level of income. In this article, the falling gas prices can relate to the interaction of the law of demand and the factors that affect the quantity demanded. Clearly, this article talks about gas prices dropping which caused more American’s to going back to buying gas-guzzling SUVS and trucks. This is to my knowledge the factor price that is affecting the demand, SUVS and trucks where price decreases in gasoline increases the quantity demanded for bigger vehicles.

|Reflection|
The fact that dealers report sales of SUVS and trucks are up at least 9 percent is remarkable in my opinion. It is difficult to predict the long-term effects of high gas prices as an average consumer so deciding on buying a bigger gas-guzzling vehicle in parallel to the decrease of gasoline price is not a bad choice. The market changes as it often does. Buying a SUV or a truck is not necessary affected by gas prices but for big family purposes or participating in outdoor activities that includes hauling loads or pulling a boat. Furthermore, when the gas prices remained at a higher price there is no doubt that the sales of bigger vehicles were lower however with the prices falling in gasoline, it would be apparent that the demand for bigger vehicles would increase. As a result, the sales of SUVS and trucks would increase.