10 Nov 2008

Peter Klein Stands Up for the Small Businessman[woman]

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Peter Klein wants consumers to stop gouging gas station owners. (HT2 Steve Horwitz)

Please join me in support for poor, beleaguered gas station owners, the victims of unconscionable price gouging by ruthless consumers who are taking advantage of market conditions to reduce their demand for gasoline, driving down the price by nearly $2 per gallon over the last four months. Fortunately, governments are swinging into action. Georgia governor Sonny Perdue issued this statement: “The financial crisis has disrupted the consumption of gasoline, which will have an effect on prices. However, we expect the prices that Georgian gasoline station owners receive at the pump to be in line with changes in consumers’ incomes and the prices of substitutes and complements. We will not tolerate consumers taking advantage of Georgian business owners during a time of emergency.”

I should point out that the fall in gasoline prices really isn’t because of a drop in consumer demand; I think it’s almost entirely due to falling crude prices. So technically that would be an increase in the supply curve of gasoline at the retail level (since producers’ input prices have fallen). In other words, it’s not that motorists have decided they don’t want to drive as much at each hypothetical price of gas, just like the huge run-up in gasoline prices wasn’t because they all of a sudden enjoyed driving more. Klein obviously knows all of this, but it’s not clear if he was purposely botching the analysis in the above to make the joke.

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