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Becker is right to emphasize the role of demand and supply elasticities (how price responds to changes in demand and supply) in the startling fluctuations in the price of oil and oil derivatives such as gasoline, to deemphasize the role of speculation in those fluctuations, and to point out the social utility of speculation. If the responsiveness of supply to an increase in demand is sluggish, price will rise steeply in the short run, to ration the limited supply among the clamoring demanders—and it will rise especially cheaply if the demanders would rather pay a high price than do without.... Continue »