Article Review - Economic Journal Titled “the Demand for Automobile Fuel, a Survey of Elasticities”

1. Summary

Transportation is a necessity for people nowadays. The globalisation phenomenon has made the transportation evolving and increasingly important in fulfilling the needs either the firm in doing its business to the society for the use in daily routine. As we know the important of transportation in our life, thus, the one that affecting the transportation is the automobile fuel. Although we know that there is innovation in the mobile by using the energy from the solar, still, mostly transportation in the world still depends on the automobile fuel.

Thus, the paper about the demand for automobile fuel is chosen in order to look in the elasticity from the price elasticity and income elasticity. The authors of the paper are Daniel J. Graham and Stephen Glaister. The paper is written on the response of motorists to fuel price changes as well as looking into the magnitude of the relevant income and price effects. It is important to note that the paper also touch on the different theme such as in the vehicle technology and fuel efficiency, individual and household demand and etc.

The paper is not a methodological review instead it is focusing determining the themes of the literature. The paper also focuses on specific issues on the theme by review various previous paper regarding the elasticity in the fuel demand. The articles are noted in chronological order. The paper seeks to find a balanced view in the likely orders of magnitude of fuel demand elasticity. The paper also uses various countries in determining the elasticity in terms of short and long-term.

2. Findings of the article

The findings obtained from the paper is that the elasticity either it is short or long term elasticity; there are differences with respect to price. In the short run, it can be considered that the elasticity is consider as less elastic as the changes in the price does not bring much difference in the demand for fuel. We can infer from here that, regardless the changes in the price of the fuel, people still have to use the transportation as it can be considered as necessity in living. From the paper, it is said that the proof from a wide range of studies in many countries, in the long run the response regarding the changes in price toward the demand of fuel is significant.

From the paper also, there is relation in the changes in the price of fuel with regard to the volume of the traffic and on the volume of the fuel burned. In detail, the change in the price of the fuel will give more impact in the quantity used of the fuel rather than in reducing the traffics. Thus, from the evidence in the paper it is safe to say that people will minimize the use of fuel with response in increment of fuel price.

From the paper, the income elasticity of fuel demand varies in the short run and long run. As we know that demand for cars is heavily depends on the