| Widely Conventional wisdom holds that gas price increases discourage potential consumers from buying automobiles as the effective cost of ownership becomes more expensive. On the other hand, car buyers look for more gas efficient automobiles as gas prices increase. The question, therefore, is whether the sales of gas efficient automobiles will increase or decrease when gas prices rise.;To test this question, I segregated automobile sales into four categories: (i) efficient cars, (ii) inefficient cars, (iii) efficient trucks, and (iv) inefficient trucks, and then ran a regression on gas price for each category. My regression results indicate that gas price changes do not affect the sales of gas efficient automobiles.;The only category of vehicle that demonstrated a statistically significant result was the gas inefficient truck category; a one percent increase in gas price resulted in 0.187 percent decrease in inefficient truck sales. In addition, a one percent increase in gas price raised the average fuel economy of automobiles sold during the test period by 0.088 percent.;In an effort to promote fuel conservation and improved environmental measures, policy makers may consider gas tax increases, whereas the opposite---decreasing gas tax rates---may be beneficial to the domestic automakers, which concentrate heavily on truck sales. |
