Gasoline

The price of gasoline continues to rise, causing consumers to make alternate choices concerning transportation as well as other decisions in their lives. Managers are interested in the choices consumers make regarding the increase of gasoline prices and how that may affect consumption of other products and services. As a single mother, my income must support my son and myself, so the little I make must stretch to encompass all of our needs.

The average price of gasoline in Vienna, WV is $3.75 per gallon, which makes most consumers wince when they fill up their gas tanks. To fill up my gas tank, in my Nissan Rogue, it costs me about $45, and that will last me a little over two weeks. So for a month, I spend roughly $90 in gasoline to provide myself and my son transportation. Other information that I need to provide is my monthly income, which is $970.

Next, I am to assume that gasoline prices doubled for a difficult summer season that would make the price of gasoline $7.50 per gallon. The increase in gasoline price will affect some of the choices I make in my life; in this case substitutions will be made. According to the text, Managerial Economics, the substitution effect is defined as, “the change in the consumption of a good that would result if the consumer remained on the curve after the price of the good changed,” (Thomas & Maurice, 2011). The substitution effect is basically the choices a consumer makes based on an increase or decrease in price. In this case, the choices I will make based on the increase of gasoline prices.

The list of possible effects are: drive less, purchase less gasoline, eat out less, spend less on maintaining my automobile, use public transportation, buy a bicycle, do not take long distance vacations, buy fewer clothes and make due around the home. Out of these possible effects, the ones that will be the results of increased gasoline prices are drive less/ spend less on gasoline, eat out less, and buy fewer clothes, and making...