Thursday, May 29, 2008

Relative price news you can use: "On the Relationship Between Beer and Gas"

From Economist's View via The Economist:

THAT inflation impacts different goods differently should be no surprise to anyone. We often neglect to consider, however, how these differing inflation rates might impact different types of consumers, or how they might influence behaviour in unexpected ways....

...Or, consider a thought experiment from Mark Thoma:
When I was in high school, most of my budget went to two items, gas and beer. At that time, the price of gas was 25 cents a gallon, and beer was $1.25 a six-pack if I remember correctly (and I may not). So the relative price was 5 to 1, i.e. to get five gallons of gas, you had to give up a six pack of beer....MORE