The positive analysis of how sensitive consumers are to changes in gas price - Research Paper Example

Sensitivity of consumers to changes in gas prices The way a theoretical world operates varies greatly to how the real world runs. In the real world, the elements that constitute to sensitivity of consumers are not dependent but rely on each other for support. For instance, gas prices should not affect the other components of a consumers lifestyle but that’s not so in the real world. A change in gas prices results in a proportionate change in all other costs incurred by the consumer (Sobel, 2013)This is essentially because the average consumer’s budget constitutes about 5% for motor fuel.

A shift in the gas prices results in the consumer having to adjust their spending habits to conform to the new gas rates. This would then mean that homeowners would prefer to own homes that are closer to their workplaces or urban centers to facilitate shorter driving distances. The shopping habit of the consumer would have to change I.e. less trips to shopping malls and more shopping on the internet. Moreover, there would be considerable decrease in the amounts of goodies bought at the supermarket.

There would also be a shift from shopping at supermarkets to lower priced stores. The shift in gas prices would affect the decision of what type of car the individual can purchase. This is because different cars have varying rates at which they consume gas. Therefore, the consumers will go for those that consume less per mile covered. Some consumers will most likely choose the cheaper modes of public transport for commuting purposes as compared to driving. It would be accompanied by the use of alternative modes of transportation for instance bicycles etc.

Consumers are likely to invest less and save considerably lower amounts of money as compared to when the gas prices were lower. Utilization of amenities like telephones, electricity is likely to go down also (Sobel, 2013). Essentially changes in gas prices cause proportionate change in the lifestyles of the consumers.ReferenceSobel, A. C. (2013). International political economy in context: Individual choices, global effects. Thousand Oaks, Calif: CQ Press.