Policy implications of the price elasticity of demand for petrol in South Africa

Cloete S.A. ; Smit E.V.D.M. (1988)

Using a production function approach, the relevant long- and short-run elasticities of petrol demand were estimated and found to be markedly less than unity. The main policy conclusions were found to be that supply security regarding petrol should be a policy priority, that the price mechanism can be used to a limited extent to encourage conservation, and that cost increases can be shifted largely on to consumers, implying that price administration in some form might be justifiable from an equity viewpoint. The last conclusion, however, depends to a large extent on how motor vehicle ownership is distributed among income groups in South Africa. -from Authors

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