[Rodney King]

For example, it doesn't matter how high the price for food goes because of short supplies, the demand for food will not drop below a certain minimum level, because it is an essential commodity. At this point, supply and demand laws break down. Gasoline and other energy commodities are in this category. No matter how high the price goes, past a certain point there will be no corresponding reduction in demand. This is why price gouging is a real event in these cases.

In economic terms, what you are describing is called the price elasticity of demand. Different products have a different price elasticity of demand. You are correct, food has a low price elasticity of demand. That is, demand doesn't change much as price changes. Gasoline has a low short-term price elasticity of demand, although a reasonably high long-term price elasticity of demand.

Still, in absolute terms, it is there. Demand went down this week, people drove less.

As for price gouging, why did the evil gas companies wait until now to raise prices? Why did they ever let prices get as low as $1 in 1995 or so? Were they just stupid giving up all those profits in 1995 when they could have been charging more?

[Hendrix]

Excellent post. Right on the money. You actually understand economics, unlike most people on this board.