Bus 640

Substitution and income effect has a big role in today society. I will examine how substitution and income affects the gasoline prices. If a person spend 120 for gasoline each month, 4 weeks. Assuming that there has been a price increase of 100% during summer. The cost for gasoline in the next 3 months would be 240 per month if the drive of the sale would stay the same. For the entire summer, 12 weeks the gasoline price will be 720. The average cars usually get 30 miles per gallon of gasoline. During the summer months the cost of gasoline is per gallon compare to spring per gallon.

Thomas and Maurice state that "when the price of a good increases, consumers are worse off" and in this instance, the increase in gasoline prices makes it necessary to adjust the monthly...