World Affairs Board - View Single Post - Sharp Reaction to G.O.P. Plan on Gas Rebate

**Shek** · 05-01-2006, 16:05 PM

Actually, instead of posting the econ stuff, which is a little bit technical if you haven't had micro theory, the basics are this:

If you cut the tax, then you reduce the price. People see the reduced price at the pump, and then won't limit themselves on driving, thus increasing demand at a time when supply is restricted. Prices rise and the tax savings becomes moot.

Give a rebate, and if it's the $100, people will think it's crap, will see the $3 gas prices, and keep on consuming as if there was no rebate. If it's the $500, people will use it towards buying a big screen TV instead of gas, and so they'll still treat gas at its $3 price. Bottomline, people for the most part won't behave as if that $100 or $500 or whatever is in their pocket, and so demand for gas doesn't change.

05-01-2006, 16:05 PM	#3 (permalink)
Shek *Military Professional* Moderator Join Date: 02-23-05 Location: Krblachistan Posts: 7,981 Country:	Actually, instead of posting the econ stuff, which is a little bit technical if you haven't had micro theory, the basics are this: If you cut the tax, then you reduce the price. People see the reduced price at the pump, and then won't limit themselves on driving, thus increasing demand at a time when supply is restricted. Prices rise and the tax savings becomes moot. Give a rebate, and if it's the $100, people will think it's crap, will see the $3 gas prices, and keep on consuming as if there was no rebate. If it's the $500, people will use it towards buying a big screen TV instead of gas, and so they'll still treat gas at its $3 price. Bottomline, people for the most part won't behave as if that $100 or $500 or whatever is in their pocket, and so demand for gas doesn't change. __________________ "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3