The Bureau of Labor Statistics of the U.S. Department of Labor is the principal Federal agency responsible for measuring labor market activity, working conditions, and price changes in the economy.
P R I C E S A N D S P E N D I N G
Using gasoline data to explain inelasticity
By Eliana Eitches and Vera Crain
One of the most common topics of conversation, regardless of the time of year or the weather, is gasoline. This
topic brings to mind a myriad of issues, such as gasoline’s potential environmental impact, public policy decisions,
and alternative fuel sources. But, the seemingly omnipresent issue is the price consumers pay at the pump. Some
people become concerned about paying $4.00 or more a gallon. Others talk about the miles per gallon their car
obtains. In certain areas, people discuss congested highways with slow-moving vehicles guzzling tanks of gas.
With all this attention, it would seem reasonable to assume that those dissatisfied with the price of gas would buy
fewer gallons of gasoline as the price per gallon increases. Using information from the Consumer Expenditure
Survey (CE) and the Consumer Price Index (CPI), we examine how expenditures for gasoline have changed over
time and whether the number of gallons purchased has varied.
March 2016 | Vol. 5 / No. 5
U.S. BUREAU OF LABOR STATISTICS
This Beyond the Numbers article uses monthly and quarterly average price per gallon of gasoline from the CPI,
and dollars spent on gasoline per quarter from the CE. Similar gasoline average price data are available from the
Energy Information Agency (EIA) within the Department of Energy. A comparison of the average prices showed the
two sources to be similar, with more variations in the data from the EIA. For this analysis, CPI data were selected.1
Data from the CE suggest that individual households (excluding commercial use) buy as many gallons of gas and
travel as many or more miles regardless of the price of gasoline.
The law of supply and demand states as prices rise, the quantity of the good that the consumers demand falls. The
reverse would also be true: as price fall, consumer demand rises. For most goods, when prices rise, consumers
tend to purchase less; and, when prices fall, con