Gas prices?
How are consumers effected and affected?
Answer:
The general affect of an increase in gas prices is felt at several levels, all of which involve increased expenditure on gas and products that require transport, and either increased indebtedness or decreased consumption of other components.
Gas is essential for personal transportation as well as for transporting groceries, comestibles, manufactures, and sundry goods that are not produced locally (actually, gasoline is essential for these too, but gasoline prices levy less impact where transportation involves a smaller distance). As such, a price increase is partially passed on to consumers.
How consumers react can be classified as either an income effect or substitution effect. Higher prices for any good, particularly an essential good such as food or gas, effectively reduce the consumer's income (technically, purchasing power). This is especially so if the price increase is widespread, and can be considered a mechanism of general price inflation. That's income (or wealth) effect.
Substitution effects involve consuming less of the good whose price has risen. This means driving less, buying a more fuel-efficient vehicle, switching composition of grocery purchases to items that are less expensive (note there are reasons other than gas prices for relative food prices to change), and utilizing mass-transit.
Note that both income and substitution effects tend to reduce the level of well-being for a price increase. This is because a reduced income (or purchasing power) leads consumers to buy less, and if consumers switch purchases of goods only because the price of one went up relative to the other, then the good the consumer switched to is obviously not as desireable as the one whose price went up. The exception is if the price of the substitute also went down, but that doesn't seem to be happening much here.
A final note is interesting; rather than spend less, consumers seem to be spending MORE, which is somewhat infuriating to economists because it indicates an increased tolerance for household debt that could be dangerous in the long-run.
Consumers aren't effected - incorrect use of intransitive verb.
If you're asking this question it's a cinch you don't own a vehicle.
Well, I live in Ohio and gas prices have been 3.49. I went to the store and normally pay 2.12 for a gallon of 2% milk. I now have to pay close to 4.00.
It's an understatement... I just wonder what the profit margin is going to be this quarter.
well, for one thing, we're all pretty po'd that we have to pay these prices in the first place...
some people stay at home because they can't afford gas... but some continue to drive anyway, despite the prices.
Consumers are not only taking a big hit at the pump, but the companies have to pay extra to get the consumer's goods to the stores. I'm a truck driver, and I just delivered a truck load of water heaters from Laredo, Texas to St Paul, Minnesota. Because of the high price of fuel, I was paid an extra $447.
So the extra price the company had to pay is just passed on to the consumer in the form of a higher price.
It's better to invest in gas co. than to buy gas.
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Answer:
The general affect of an increase in gas prices is felt at several levels, all of which involve increased expenditure on gas and products that require transport, and either increased indebtedness or decreased consumption of other components.
Gas is essential for personal transportation as well as for transporting groceries, comestibles, manufactures, and sundry goods that are not produced locally (actually, gasoline is essential for these too, but gasoline prices levy less impact where transportation involves a smaller distance). As such, a price increase is partially passed on to consumers.
How consumers react can be classified as either an income effect or substitution effect. Higher prices for any good, particularly an essential good such as food or gas, effectively reduce the consumer's income (technically, purchasing power). This is especially so if the price increase is widespread, and can be considered a mechanism of general price inflation. That's income (or wealth) effect.
Substitution effects involve consuming less of the good whose price has risen. This means driving less, buying a more fuel-efficient vehicle, switching composition of grocery purchases to items that are less expensive (note there are reasons other than gas prices for relative food prices to change), and utilizing mass-transit.
Note that both income and substitution effects tend to reduce the level of well-being for a price increase. This is because a reduced income (or purchasing power) leads consumers to buy less, and if consumers switch purchases of goods only because the price of one went up relative to the other, then the good the consumer switched to is obviously not as desireable as the one whose price went up. The exception is if the price of the substitute also went down, but that doesn't seem to be happening much here.
A final note is interesting; rather than spend less, consumers seem to be spending MORE, which is somewhat infuriating to economists because it indicates an increased tolerance for household debt that could be dangerous in the long-run.
Consumers aren't effected - incorrect use of intransitive verb.
If you're asking this question it's a cinch you don't own a vehicle.
Well, I live in Ohio and gas prices have been 3.49. I went to the store and normally pay 2.12 for a gallon of 2% milk. I now have to pay close to 4.00.
It's an understatement... I just wonder what the profit margin is going to be this quarter.
well, for one thing, we're all pretty po'd that we have to pay these prices in the first place...
some people stay at home because they can't afford gas... but some continue to drive anyway, despite the prices.
Consumers are not only taking a big hit at the pump, but the companies have to pay extra to get the consumer's goods to the stores. I'm a truck driver, and I just delivered a truck load of water heaters from Laredo, Texas to St Paul, Minnesota. Because of the high price of fuel, I was paid an extra $447.
So the extra price the company had to pay is just passed on to the consumer in the form of a higher price.
It's better to invest in gas co. than to buy gas.
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