The Present Value of Future Gas Use

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This Demonstration shows how various factors affect the present value of the amount you can expect to pay for gasoline for your car over the next 10 years.

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You first select whether you are considering an "American" scenario or a "European" scenario. In the former, dollars, miles, and gallons are used and initial gasoline price is set at $4 per gallon, which is the approximate price prevailing at the time this Demonstration was created. In the latter, Euros, kilometers, and liters are used and initial gasoline price is set at €3.4, which is the approximate price prevailing at the time this Demonstration was created.

You then select the fuel economy of your car, the amount your car is driven each year, your "elasticity of demand" for gasoline, a discount rate, and the number of years you wish to take into account.

The Demonstration computes the amount of gasoline you currently consume, your average consumption over your selected time horizon, and the present value of the gasoline you can expect to use. "Elasticity of demand" in this context means the percentage decline in use of gasoline that accompanies a percentage change in price. The decline can come either from driving less, driving in a more economical way, or obtaining a more fuel-efficient car.

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Contributed by: Seth J. Chandler (June 2008)
Open content licensed under CC BY-NC-SA


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