Although many may not realize it, consumers have a lot of power in our economy. In many ways consumers are in the driver’s seat in their decisions about buying. Can consumer’s behavior really have an impact on the economy, for example, on gas prices? N.C. State University economist Mike Walden answers.
“They can … and I think, obviously, the way consumers can impact things like gas prices is the change their buying behavior. For example, in response to gas prices going up, buy less gas. And if everyone does that, in economics lingo, that means demand goes down, purchasing goes down, and that actually puts down more pressure on gas prices.
“And, indeed, there’s some evidence that consumers are actually reacting faster now to the latest spike in gas prices compared to the last time that we had gas prices go up to $4 a gallon. It took much longer for consumers to react. And furthermore, there’s some evidence to suggest that consumer’s reaction is having an impact in the sense that we have seen over the last couple of weeks a major decline in the price of oil and will likely see that show up at the gas pump.
“So, I think that is a very good point to remember that, yes, consumers are simply not sort of sitting ducks, as you might say, who are just responding without any impact on their own to things like higher prices. We can have an impact on those prices in terms of what we do with our buying behavior.”