I’ve noticed a couple of things over the past few years. The price of gasoline continues to increase over time. There have been some relatively minor fluctuations but, in general, we continually pay higher and higher prices. And we complain about the rising price of gasoline, fully aware that there are very limited substitutes for gasoline and oil, as used for driving and heating homes. Recently a common price for unleaded gasoline at the gas pumps in the mid-Hudson valley of New York has been approximately $3.89 per gallon. The other day a local gas station was selling regular unleaded gas for $3.75 per gallon…. I filled up the tank in my car and felt that I had gotten a real bargain! On the other hand, bottled water has become a popular consumption item. We willingly purchase bottled water, even though there are substitute beverages, including juice, coffee, tea, milk, soda, and tap water. I collected information on the price of bottled water at a local grocery store. The least expensive brand was Poland spring water (@$.49 per quart) and the most expensive brand was Perrier (@$1.91 per quart). If we compare the price of water with the price of gasoline, Poland spring water costs $1.96 per gallon and Perrier costs $7.64 per gallon. The least expensive brand is not much cheaper than gasoline and the most expensive brand clearly costs a lot more than gasoline per gallon.

Why are we so willing to pay these prices for an item (bottled water) that has many alternatives and yet complain about the price of gasoline, for which there are few alternatives? Does there seem to be a relationship between a buyer’s sensitivity to price and how much we complain?

Answer rating: 100% (QA)

Introduction There are several things that control demand and supply of products and one of them is being a monopoly in the market The fact that gasol... View the full answer