Saturday, August 21, 2010

Why is the price of oil (Gas) affecting the equilibrium price on consumers budgets?

not only that, but as the price of gas and diesel increases so does the cost of transporting goods. the average piece of fruit traveled 2200 miles just to get to your kitchen. oranges from Florida, apples from Michigan and bananas and kiwi from the tropics. since fuel cost goes up the cost of transporting goods goes up. the industry will pass the fuel cost to consumer just by increasing slightly the cost of the product. so you pay more for the product.Why is the price of oil (Gas) affecting the equilibrium price on consumers budgets?
As the price of oil increases (like we saw in the summer time), consumers will have to pay more money out of their pocket to do the same amount of driving they would if the price is cheaper. This impacts the amount of disposable income they will have, because now they will have to pay more to go just as far as would have when the price of oil was cheaper.

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