Relate Essay Example | Topics and Well Written Essays - 750 words

Relate - Essay Example There have been must studies of the price of gasoline in the United States for the past decades. Espey in the Journal on energy says that the cost of gas largely depends on the elasticity of demand for gas. In a period of less than a year Espey established, the elasticity was negative 0.26%. Therefore, an increase in the cost of gas by $1 reduces the demand by 2.6%. In the long term, the elasticity changed to negative 0.58%. Therefore, price elasticity of demand can explain low prices of gas in the U.S. According to Espey increase in price of gas reduces the demand for gas among consumers. For producers to realize increased revenue over a short run and in the long run, the price of gas ought to low (Espey 52). Given that the U.S consumers changes their demand for gas due to increase in price, taxing gas by the government will have the same effect of lowering the demand for gas consumption. Gratch in his study found that the tax on gas in United State of America differed from that of Britain, France and Norway. These countries had high taxes on gasoline than the U.S. Saudi Arabia and Venezuela pay for 12 cents per gallon, but they are leading producers of gas in the world. The discrepancies on the prices can be explained by tax rates in different countries. The U.S tax rates are 15-20% while the European nation taxes at a value higher than 20%. Elasticity, therefore, is a determinant of gas price in the U.S. Gas has positive and negative externalities. It has by products are used in many sphere of life including jet fuels, to heavy machine diesel. Nonetheless, it has the negative externalities of gasoline that affects negatively the cost of gas. In the U.S and even other developed nations, the public is now turning to clean energy. Consequently, less gas is used in the manufacturing. Nuclear powered electricity has substituted gas consumption decreasing its demand and negatively