In The News #109 >>

>> TITLE

New Diesel Cars Hit the Market

Lead Story-Dateline:
White, Joseph P.
“A New Crop of Diesel Cars Hits the Market”
The Wall Street Journal, Thursday May 27, 2004, pgs. D1 & D7

>> SUMMARY

The 1980's U.S. experience with diesel engines was problematic.   Gas prices jumped to inflation-adjusted prices similar to current prices and we experimented with dirty, noisy, and unreliable diesel engines in passenger cars. Mercedes and Volkswagen hope that most of us have forgotten those days and have introduced a new breed of diesel autos.

The new cars are much more efficient and reliable and have been marketed in Europe for quite some time.   However, one of the hurdles is that U.S. emission standards are tough to meet.   The Euro-diesels also do not have exhaust cleaning technology that will handle the high sulfur U.S. diesel fuel.   Other critics point to the limited availability of diesel fuel across the U.S.

VW is undaunted.   The company introduced the diesel Passat, the only midsize diesel sold in America.   The car, and strategy, is an effort to curb falling U.S. sales and profits.   Next month's advertising campaign will highlight the car's fuel economy.   The diesel Passat gets 38 miles per gallon compared with 31 mpg for its gas counterpart.

>> Talking it Over and Thinking it Through

  1. What is own-price elasticity and how does the concept relate to this article?
  2. How does the availability of substitute goods impact a product's elasticity?
  3. How does that concept relate to this article?
  4. What may be the long-term response to the increased gasoline prices if they are sustained?

>> Thinking About the Future

During the next decade I think you will see more and more focus on greater efficiency in automobiles. As the impact of our dependence on foreign oil trickles down to consumers at the gas pumps, they will begin to put more pressure on politicians to do something. Eventually laws requiring greater auto efficiency will surface and be implemented over time. See what happens in the next few years.


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