Question

Why does an increase in gas prices lead to less consumer spending on other items?

Answer 1

Answer:

Volatile gas prices have taken center stage in the media this year as the national average for a gallon of gasoline has topped $4. Political unrest, the impending hurricane season, flooding in the Mississippi and increased demand during the summer driving season could push prices even further. At the individual level, higher gas prices mean that each of us will pay more at the gas pump, leaving less to spend on other goods and services. But higher gas prices affect more than just the cost to fill up at the gas station; higher gas prices have an effect on the broader economy. (Don't believe the water-cooler talk. Big oil companies aren't to blame for high prices.