Wednesday, March 5, 2014

How Gas Prices Impact Economics

Joseph Buschman
Mr. Reuter
Economics
3 March 2014

How gas prices Impact economics

Every week all over America gas prices fluctuate affecting everyone and their families. Many Americans have to budget their week and their daily driving around the cost of gas prices. The opportunity cost of taking the bus over a car is there for many, however it is often passed up. Prices affect everyone, from retailers to the auto industry as well as public transportation. We has Americans never know when or where the price will raise all we know is that it can happen at any time.

To begin with volatile gas prices have taken over media and television, from applications on our telephones updating us on where the cheapest gas prices are, to daily news updates showing us the same cheap prices. America is pinching pennies to travel to work and back. The first side effect of raising gas prices is the decrease in spending. Shoppers conduct much less spending and according to MasterCard Advisors “online shopping in the United States during April, 2011 grew by its fastest rate in almost four years” (How Gas Prices Affect the Economy).This nice alternative is convenient for the consumer however does effect the businesses economically not having the costumer physically there. Even with purchasing the item online consumers still have to pay for shipping which could then in turn be cheaper then commuting to the store themselves.

In addition to retailers coping with raising gas prices the auto industry fully embraced the change. They are designing promoting and selling more fuel efficient vehicles. I am one of the many Americans however that cannot afford a new fancy fuel efficient vehicle and takes a weekly visit to the pump to fill up a very old and quite thirsty 1994 Ford Explorer. I do look forward to the day that I can purchase a fuel efficient car. Consumers support the sales of hybrids in the United States and “sales of hybrids has increased 33.9% in the first quarter of 2011 in comparison to the same period in 2010” (How Gas Prices Affect The Economy). While this is good news for people selling hybrid cars and there is no scarcity of theses gas savers. Auto industry sales for new cars have declined and more people like myself can only afford to lease or own a used vehicle.

I have to cut back in many areas just like other people. For example it would be great if my boss would look at me and say he is going to pay me more because the price of gas went up. We all know that will never happen. The chart below shows how this affects the economy. If income doesn’t rise with the price of gas then the economy suffers.  As well as the article How Gas Prices Affect the Economy states, “Some businesses, including colleges, have elected to go with a four-day weeks to limit their employees’ or students’ financial burden for commuting. In 2008 Southwestern Community College announced a four-day school week to help students and staff save on gas money” (How Gas Prices Affect The Economy). Though it would be nice to have a 4 day week it is very unlikely to happen in such a financially stable community like Pewaukee.
 

The last thing that needs to be discussed is public transportation and the increase in use since the price of gas has risen. Americans are saving money in large cities like New York by taking the bus or train, instead of driving. To get a better picture at the amount being saved,  “February Transit Savings Report, individuals who ride public transportation instead of driving can save, on average, more than $826 this month, and $9,917 annually.  These savings are based on the cost of commuting by public transportation compared to the cost of owning and driving a vehicle which includes the February 12, 2013 average national gas price ($3.60 per gallon- reported by AAA) and the national unreserved monthly parking rate” (As Gas Prices Rise). Public transportation is sure saving those who use it a lot of money. However gas is most definitely one of the inelastic products that we discussed, we can go without it however the majority of the nation chooses not to. Finally the trade off to take the bus or other mode of transit isn’t always around for people.
As high school student with low paying job and a beater car I feel the pain first hand.  For those students that do not have to pay the expenses that come along with your car consider yourself lucky, in my opinion this takes a lot of responsibility away from teenagers. Whether you pay for it or not the pain at the pump is real and affects a large part of the economy.

Youtube Video

11 comments:

  1. Gas is one of those things that people could live without but pretty much never will. No matter what people will almost never want to carpool, bus, or bike to their desired location because we are so used to the luxury of our own cars. People will most likely need to start cutting back, or start looking into new car technology before supply starts going down.

    Good connection, and good observation Joe. I definitely agree with everything you said.

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  2. I never thought of the other impacts gas prices have on places such as restaurants and malls. I also never thought of having a four day week to save gas, that would be effective. However, with Pewaukee being so small for the majority of the students, luckily it isn't a far commute. I know that there are alternatives such as hybrid cars but I'm surprised someone has not thought of a substitute for gasoline to be used in our cars with all of our technology today. I look forward to the day that a substitute is available for gasoline other than buying a new hybrid car.

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  3. I liked how you brought up the effect of gas prices on the economy because the use of gasoline is such a big part of our lives and we use it every day. The price of gas can be very inconvenient especially depending on what kind of vehicle you have. This can easily cause people to get rid of their vehicles and turn to public transportation to save money.

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  4. Back in the 1940s people never dreamed that prices would ever get as high as a dollar a gallon, but now we dread when gas goes to four dollars a gallon. It proves the saying "the small things add up quick" you have a 20 gallon tank, at four dollars a gallon that's $80.00 for a full tank. Big Rigs have one hundred gallon tank, comes to four hundred dollars for a full tank. do we get paid enough to compensate for gas.

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  5. I admit, I will never stop buying gas because I need it to get around and pursue my social life. Which does make it an inelastic good, because no matter what the cost, many people are willing to buy it. Although for some people it may be an elastic good, meaning that they will not buy it when the price rises, maybe because they simply can't. Some people barely make enough money to pay for their own gas to get to work and home and go get groceries and food and run errands. People may resort to public transportation or other forms of transportation if the prices continue to rise.

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  6. Paying for gas gets very expensive, but for me it is a necessity. My work is a half hour away. So i drive an hour total to work and back almost every day. Which is using a lot of gas, leaving me to buy more gas every two weeks. I also love my job so it is worth it to use so much gas and spend the money. Gas to me is in-elastic, but to others it is elastic. There is a good point to use public transportation. However if more people are using public transportation, you might not be able to get to work on time, or the price of public transportation could go up if the demand for it goes up.

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  7. Outstanding post! I fill my gas tank once a week which costs me 50 dollars. Unlike most people in this country, gas is in-elastic to me. Because Pewaukee is such a small town, Id be able to ride a bike to my job, school and sport. People might have to start thinking about public transportation as gas prices are increasing because it's not an elastic cause for all of us.

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  8. I liked how you said "My quite thirst 1994 explorer" because I thought it was something very cleaver to say. I myself know the struggle of driving a gas guzzling vehicle, and even though the prices are high I love every second of it. But the information you received was totally accurate, I felt like I had so much extra money when gas was 3 dollars a gallon even though I only saved 20-40 dollars. Also I would buy a more things if I didn't have to put a hundred dollars in the tank every time I fill up. However I do try to walk to school a lot but honestly that doesn't help much.

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  9. Even though I do not have a car of my own, I do know the pain. My sister has asked me for money for gas when we stopped at the gas station and it was $40(so you could say I kissed that money good bye). When you brought up the part about when the gas prices go up so should your pay. You are right it would be very nice to have that but that will never happen like you said.

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  10. I always knew gas played a role in the economy, but never really knew how much. The graph that you posted, first showed me how much of a factor raising gas prices affect consumers on other items, and is a great example of how gas is in-elastic, but everything else can elastic. The best example shown was how much people dine out, because when fewer people dine out, the less business a local restaurant gets, which means less work for their employees, which is a huge chain reaction for the local economy.

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  11. I think that public transportation, especially in larger cities, is something that many Americans overlook on a daily basis. As gas prices go up, the price of public transportation stay at a relatively small account compared to the amour of money people are spending to pay to drive to work and back. Chris also does make a good point that less travel by cars means less business for many companies which means less money being put into the economy.

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