For a real-world illustration of the law of demand, consider how gasoline consumption varies according to the prices consumers pay at the pump. Because of high taxes, gasoline and diesel fuel are more than twice as expensive in most European countries as in the United States. According to the law of demand, this should lead Europeans to buy less gasoline than Americans—and they do. As you can see from the figure, per person, Europeans consume less than half as much fuel as Americans, mainly because they drive smaller cars with better mileage. Prices aren’t the only factor affecting fuel consumption, but they’re probably the main cause of the difference between European and American fuel consumption per person.
PAY MORE, PUMP LESS
1.0 1.2 1.40.60.2 0.8 0.4
$7
6
5
4
3
2
1
Price of gasoline (per gallon)
Consumption of gasoline (gallons per day per capita)
0
Italy
France
Canada
Japan
Germany
Spain
United Kingdom
United States
Source: U.S. Energy Information Administration, 2009.