Wednesday, May 17, 2006

Gas and Guzzlers are Complements

More evidence on the incentive effects of high gas prices in today's Wall Street Journal:
Rising gas prices are leading to some funky economics at the rental-car counter: Prices are dropping on SUVs and big luxury cars, and increasing for the cramped, compact models that are now in greater demand.
Of course, there is nothing particularly "funky" here. The phenomenon could be explained by the average ec 10 student after about two weeks of classes.