Gas Price Surge Thrusts Inflation
Gas Price Surge Thrusts Inflation: ‘Gas price pushes inflation’ has been making the headlines all over the world. The dramatic increase in prices has been a cause of concern in every household and it is important to understand the basics of it.
Cost-Push Inflation
The hike in inflation and gas prices is a classic example of cost-push inflation. Cost-push inflation occurs if either the supply is low or demand is high. The demand for gas is inelastic that is to say, the demand stays high even with a hike in price. The gas price surge falls in this category as people have no option but to purchase gas even at inflated prices.
Gas Price & Inflation
It is important to understand that when gas price pushes inflation, it has an impact on every aspect of our lives. With a rise in inflation, prices increase in literally every sector. This means the items used every day as well! For instance, items from the grocery store, bus ride, subway each and everything!
This increase in prices in all sectors cut back on the spending power of the consumers and thus leads to a sluggish economy in most cases.
How do Gas Prices affect the economy?
In the simplest of terms, the more you pay at the gas pump, the less you have left to spend elsewhere. It can be concluded therefore, that an increase in gas price handicaps the spending power of the common man.
Retailers: While it sounds vastly disconnected, gas prices affect retailers too. People are choosing to shop online rather than driving to shops to avoid high gas prices. This reduces retail sales but at the same time, boosts online sales. Prices at outlets also hike since the increased shipping cost is passed on to the consumer.
Hiring: Rising gas prices signal an unstable economy which in turn causes employers to re-evaluate decisions to begin hiring as they have the bottom line to think about!
Public Transportation: Increase in gas prices means the fares go up. And this is true for all means of communications. Hence, getting anywhere; work, school or to the mall becomes more taxing financially.
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