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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- Winter '14