[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

$1.60
PRICE PER GALLON
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
Price in
current
dollars
Price of gas
adjusted for
inflation
$0.00
1970 1975 1980 1985 1990 1995 2000
Figure 3.6
U.S. GASOLINE PRICES
Adjusted for inflation, gasoline prices over the past decade have been about the same
as they were before the price increases of the 1970s.
SOURCE: Department of Energy, Annual Energy Review 2003, September 7, 2004 (www.eia.
doe.gov/emeu/aer/petro.html).
gas prices are adjusted for inflation, the real price of gasoline—the price of gas
relative to the prices of other goods—was lower in the 1990s than it had been before
the big price increases of the 1970s (Figure 3.6). As a consequence, the demand
curve for large cars shifted back to the right. This time, the change in demand was
reflected in booming sales of sports utility vehicles, or SUVs. The registrations of
light-duty trucks (which include SUVs, minivans, and pickups) jumped from less
than 20 percent of all vehicles in 1980 to 46 percent in 1996. 1
SHIFTS IN A DEMAND CURVE VERSUS
MOVEMENTS ALONG A DEMAND CURVE
The distinction between changes that result from a shift in the demand curve and
changes that result from a movement along the demand curve is crucial to understanding
economics. A movement along a demand curve is simply the change in the
quantity demanded as the price changes. Figure 3.7A illustrates a movement along
the demand curve from point A to point B; given a demand curve, at lower prices,
more is consumed. Figure 3.7B illustrates a shift in the demand curve to the right;
at a given price, more is consumed.
1 P. S. Hu, S. D. Davis, and R. L. Schmoyer, Registrations and Vehicle Miles of Travel for Light-Duty Vehicles, 1985–1995
(publication ORNL-6936) (Oakridge, Tenn.: Center for Transportation Analysis, February 1998), p. 1.
60 ∂ CHAPTER 3 DEMAND, SUPPLY, AND PRICE