However houses are built on land and the price of the

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Unformatted text preview: houses were candy bars or bread, suppliers would shift their supply from Louisville to San Francisco. However, houses are built on land, and the price of the land is part of the price of a house. Naturally, suppliers cannot 142 Chapter 6 Price: Supply and Demand Together pick up an acre of land in Louisville and move it to San Francisco. So, what have we learned? When the supply of a good cannot be moved in response to a difference in price between cities, prices for this good are likely to remain different in these cities. QUESTION: I was in both Oklahoma and California this past summer and the price of gas was higher in California than in Oklahoma. Gas is something that can be moved from place to place (by trucks). So why wasn’t the price of gasoline the same in the two locations? ANSWER: Good question. The major reason for the difference you noticed is that taxes on gasoline are different in different states. Many states (and counties too) place an excise tax on gasoline. An excise tax is a tax on the manufacture or sale of a particular good. For example, in Florida gasoline is subject not only to a state excise tax but a county excise tax in many cases as well. State and county excise taxes differ across the country. It so happens that excise taxes on gasoline are less in Oklahoma than in California. This difference in excise taxes often explains why you might pay more for a gallon of gasoline in one state than you pay in another. 06 (128-153) EMC Chap 06 11/21/05 3:14 PM Page 143 Supply and Demand at the Movies Have you noticed that the prices for movie tickets can vary? If you want to see a movie on Friday night, you may have to pay $8, but for the same movie at 11:00 a.m. on Tuesday, you may have to pay only $3.50. The difference depends on supply and demand. Certainly the supply of seats in the theater is the same Friday night as Tuesday morning. The demand, however, is different. The demand to see a movie on Friday night is higher than on Tuesday morning, and the higher demand makes for a higher price. Supply and Demand on a Free...
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