ypsi~dixit

The funny thing to me is that I have observed varying prices for milk around town. Yet no one would dream of making "Detroit Milk Prices." Granted, one doesn't buy 20 gallons at a time. It's just that people pay an exaggerated amount of attention to price variations in gasoline when numerous other consumer products also wobble around in price. There's something about gas that ties in with the self-image people associate with their car...that's my working theory, at least.

I dont know what it is either but people *really* get weird about gas. I have never understood the idea of getting weird about even a ten cent difference in price. I mean, my tank is 12 gallons so a 10 cent difference in price is $1.20. Now, I might drive an extra block out of my way for $1.20 but I wouldnt drive across town for that.

My personal theory is that even on an individual level the demand for gasoline is pretty inelastic in the short term. If the price of milk goes up a dollar a gallon, most people will simply drink less and maybe even a lot less. But if the price of gasoline goes up a dollar a gallon, most people find that they might have trouble driving less. Their work wont suddenly get closer. The bus wont get any easier to ride. They cant just run out and get a more fuel efficient car.

In other words, people really are addicted to gasoline in a way and on some level most of us realize it and act accordingly. So, what seems like irrational behavior starts to make more sense. If there were a shortage of alcohol and the price were going through the roof, I'll bet you would start seeing alcoholics behaving in a similar manner

Lynne, that's a good point about the inelasticity of the demand for gas, versus something like milk, forcing people to use a given amount of gas each day.

There's no choice: people are forced to buy gas or no work. So if someone is forcing you to buy something, it makes more sense to make a bit more effort to get a lower price.

I think it's a purchase with few complicating factors. So it's easy to compare on price alone.

Gas of a given grade is pretty much the same everywhere. It's often purchased by itself. So its price controls the whole bill. You might buy milk at the store with the best meat prices, or at the store that just seems cheapest overall. Service isn't an issue if you pay at the pump. And you don't park and walk to a gas store in a way that lets you park once and hit a few nearby stores without moving your car.

Its price controls the whole bill; that's a good point. Makes sense.