Wednesday, May 10, 2006


What's The Big Deal About Gas Prices?

I believe that the reason we don’t often hear a lot of complaining about inflation is because inflation is usually focused on the rich and middle-class. While there has been mild inflation, people in the lower income brackets have been affected less than the upper. In fact, while income was flat (slightly increasing) over 2000-2003 for the lower income brackets, expenses were also flat and actually decreased some. This is because they purchase from a different basket of goods, and because many of the products they buy may be easily substituted. Gas, however, is a larger portion of expenditures for the lower income earners than the upper income earners. It is also one of the expenditures that is not easily substituted, so gas price increases cut into disposable income.

Gas prices cut into the disposable income of the lower 60% of earners, who have less disposable income to begin with. So you are affecting a lot more people, and people who are affected more.

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