Toyota Prius sales pass Ford Explorer:

Americans bought more Toyota Prius hybrid gas-electric hatchbacks last year than Ford Explorer sport-utility vehicles, the top-selling SUV for more than a decade.

The change of fortune, buried in U.S. vehicle-sales data for 2007 and unthinkable a few years ago, will find an echo at this year's Detroit auto show, which starts Sunday.

While Americans' love for powerful gas guzzlers remains strong, a slowing economy and high gasoline prices are forcing buyers to lower their sights.

Some basic micro:

  1. Automobiles and gasoline are complementary goods. The increase in gas prices reduces the demand for SUVs and increases the demand for hybrids. This illustrates one of the subtles of the demand rules, gasoline and hybrids aren't substitutes as their price/demand relationship suggests. This ain't physics, the laws are meant to be broken.
  2. When income (i.e., GDP) increases (decreases) the demand for normal goods rises (falls). When income (i.e., GDP) increases (decreases) the demand for inferior goods falls (rises). The article above suggests that a slowing economy, a decrease in income, is partially causing the increase in demand for hybrids. This implies that hybrids are inferior goods.

I'm good with #1 but I doubt that an empirical analysis of the demand for hybrids would support the assertion that hybrids are inferior goods. In other words, if you want a big SUV but find that you can't afford one, my guess is that you don't switch to hybrids, you switch to some other automobile.

Hat tip: Dancing Carpenter.


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