High gas prices, complements and substitutes
This is the last blog post of the semester for any of my students to comment on for extra credit. And they had better be fast about it. Only hours to go. Well, here it is.
Gas prices. Remember those prices you have to be grumbling about when you fill up at the pump? Notice, that there are no lines at the gas stations. Hmm??? Maybe that stuff about price controls causing shortages might be right.
Well, while I was proctoring my Wednesday night class’s final, I read through some articles on Drudgreport.com and came across two articles for this final post that has to do with my 211 principles class. First, this article from the Boston Globe is on how people are trying to get rid of their gas guzzlers because of high gas prices. How about that? The price of gasoline goes up and people start selling off their gas guzzlers and few seem to want to buy them and so their prices are going way down. What was that we said about the effects of the price of complements on the demand for something. Gasoline and gas guzzling cars are complements and so high prices for a complement (gasoline) brings down the demand, and so, the price, of its complement, the gas guzzler.
Another reaction to the high price of gasoline is to switch to substitutes. One substitute for gasoline is time. See this article from New York’s WCBS TV about people slowing down their driving. Driving 100 miles in an hour consumes more gasoline than driving that same 100 miles in 2 hours. Taking more time to get where you are going, slowing down, requires less fuel and so time is substituted for gasoline when gasoline prices climb sky high. A higher price for gasoline and people getting the same wage, the slow down some as people substitute time for gasoline.
Another substitute for gasoline is mass transit. According to this article in the New York Times, ridership on mass transit systems across the country is growing at very high rates.Â
-MC
June 26th, 2008 at 7:46 pm
As this also being the last opportunity for your summer session class to respond to a blog issue, I would like to comment on this one.
As many other drivers, I am affected by the high gas prices that started climbing aggressively and have gotten worse since you posted this blog in May. I started school in Spring of 1999, and I was living in Ellender dorm. The only time I went home, which was back to Franklin, was on the weekends. After that dreadful experience, I roomed with a friend of mine from back home. After that didn’t work, I moved home to Franklin, and started driving back and forth to Thibodaux everyday, much like I am for this semester. I was not working full time, I was not married, nor did I have a child. But as today goes, I am married and I now have a 21-month-old. I also have a full time job which I am paid salary for.
To attend school this semester, I have had to give up half of my hours a week at work, taking into account the two hour commute I have back and forth. I used to drive a Ford Escape SUV that I traded in a couple of months before starting school, and I now drive a Ford Fusion. As you may already know, the Fusion is rated highly not only in Consumer Report, but also for high gas mileage (getting about 29 mpg).
After saying that, I am well aware of the situation between complements (gas and gas guzzler) as I have traded mine in. Also, I have encountered both marginal costs and marginal benefits of coming back to school. If I understand these concepts correctly and am able to get a point across, the marginal costs I have are the additional miles I have put on my vehicle, which in turn lead to wear and tear on my car, sooner and more often trips to the gas stations, oil changes, and so forth. I have marginal benefits in the fact that being able to put my bachelor’s degree in business on my resume adds to my ability to do a job.
As far as taking more time to get somewhere could save on gas, I should have read this blog at the beginning of the summer semester. Rather than leaving my house at 8:00 a.m. for a 9:40 a.m. class, I would have left at 7:00 a.m., and perhaps the marginal benefits would outweigh the marginal costs as seen in my pocket book.
June 26th, 2008 at 9:09 pm
Are gas guzzling vehicles really the problem?
Not entirely as there are many factors that contribute to the high gas prices such as barrels of oil costing up to $135, as foreign countries control the majority of the supple of American consumption, and the cost of drilling and production of crude oil.
Are we as Americans spoiled to having large automobiles and why don’t we use smaller automobiles as they do in foreign countries?
As Americans, yes we are spoiled to our huge SUV’s and trucks. We are also very comfortable in our luxury automobiles. On a recent trip to Rome it was obvious that Europeans are more conservative with the use of outrageously priced gas by using smart cars and scooters to get around town. On the other hand some Americans find that the opportunity cost of paying high gas prices is lower than the safety they get from being in an SUV.
Is the high price of gas an economic bubble such as the recent real-estate bubble we have experienced and will gas prices eventually come down when demand is reduced by alternative fuel usage?
It is my opinion that eventually there will be a burst of the gas bubble just like there was one of the real-estate bubbles when more homes were avaible than demanded by home buyers. This eventual decrease in demand of gas will be created by the increased usage of alternative fuels such as wind mills, nuclear power, and electric or natural gas automobiles.
Brooke Hochstetler
Morris Coats 211 Econ class
M-F 9:40-11:40
June 28th, 2008 at 10:59 am
As it turns out, this is not the last blog of the semester.
-MC
June 29th, 2008 at 3:47 am
I think Americans need to get off of their high horse. Lots of people are realizing that the primary use of a car is to get from Point A to Point B. Nowadays people buy more than one car to show off. They see it as a luxury and not a necessity. (or want in the case of the economic term) I think people shouldn’t be ashamed to use thier feet to walk places. I think since the Houma-Thibodaux area is expanding, we should look into longer transit bus hours and more taxi-cab agencies. I know it doesn’t seem like much we can do, but if we just carpool or use public transportation, or even walk or bike ride places, we can help with things like this. If we look to alternative ways of travel, we can control the gas prices. Gas stations are not hurting right now. They love being able to see people scape change to pay for $4.00 a gallon gas. If Americans would stop being so lazy and thinking that people owe them a break or something, we could really benefit from going back to doing things ourselves.
June 29th, 2008 at 1:07 pm
One problem I see with the cars in comparison with gas prices today is not so much the gas guzzlers but the cars that get better mileage and eventually the cars that don’t use gas at all. I know there is a lot of development in that field due to gas prices and more money is being used for research and some of it is successful, such as the diesel engines being modified to use used grease as a fuel replacement. Also this fuel has very little or no harmful emissions which is also a plus. Although this works fine since very very few people have resorted to this, getting used grease from local fast food places, eventually if more and more people do this, then even used grease will be a hot buy in the market until the amount demanded far exceeds the amount supply. So this route will not be good as a substitute in the long run, but it interests me the alternatives that are showing up here and there. But eventually the market will be filled to the brim with cars that don’t use gasoline or diesel all together. And I have a hunch that these vehicles will be severely over priced since they are in such a high demand as it is today. I know I want one since I commute 40 minutes to and from Nicholls. Car pooling helps but not everyone can do it all semester long. So if the prices of gas continues to rise, then the first company to mass produce a legit non-fuel car will be a very successful company with no doubts. The problem is that no matter how high they price the cars, the demand for them will change very little unless the price reaches a ridiculous amount and even then the people who can afford will probably buy it no matter what price they are. And then what will happen to gasoline fueled cars? Will they become completely worthless to the point that there isn’t even any point in owning one? Hopefully the gas prices stop rising soon and possibly go down but that’s what everyone hopes for.