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Gasoline Prices

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Why is it difficult to decrease gasoline prices? Is it simply a function of supply or is it that demand is inelastic?

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Solution Summary

The solution discusses why it is difficult to decrease gasoline prices.

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The main reason why it is difficult to decrease gasoline prices is that there is no real substitute for gasoline as energy source. This was confirmed by Youngquist (2000) when he said that "no other substance can equal the enormous impact which the use of oil has had on so many people, so rapidly, in so many ways, and in so many places around the world".
Although countries in the world are into clean energy sources like electric-operated car engine, hydrogen powered vehicles, and bio-fuels but these substitutes are nowhere near the category of the versatility of gasoline.

Another reason is that the number of cars in the world is ...

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