Inflation Watch -- Rambling While Watching The Players -- March 17, 2024

Locator: 46786ECON.

Note: the following discussion excludes concert tickets (e.g., Taylor Swift) or tattoos.

Inflation? At the end of the day, two things interest me most: meals prepared outside the home, and the price of gasoline on the west coast.

The big problems for Americans this year when it comes to inflation?

Yes:

• single-unit housing
  
• gasoline
• restaurants
• home delivery (Uber, Lyft, DoorDash, Uber Eats, Grubhub)
• EVs
• college expenses (always a huge problem, but affects relatively few Americans; can amortize over years)
  

No:

• personal computers, top of the line, models phasing out --
• original price, a couple of years ago: $1199, or thereabouts
• now, easily found, around $750

• personal computers, new, top of the line -- under $1,000 for the M2 and will probably drop more by the end of the summer
• the incredible M3 coming in at same price (possibly lower) than M1 when it was released (I could be wrong, but, if so, not by much)
  

But at the end of the day, the two that will cause most problem for Americans on a daily basis:

• gasoline for those living on the West Coast
• meals prepared outside the home: 

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Elastic Vs Inelastic

Gasoline on the West Coast:

• to some extent, an "elastic" commodity -- classically, gasoline, by some economists, is considered an elastic commodity; but it's hard for me to see gasoline in this group

But, inelastic vs elastic: one can see the problem: 

• milk: as an inelastic commodity, a 1950's metric; no longer as relevant in 2024
• gasoline: other economists consider the price of gasoline inelastic; on the west coast, absolutely
• iPhones: absolutely wrong; very, very elastic; why?
• new models come out each year;
• folks can delay purchase of new iPhone for a year or years
• carriers (ATT, T-Mobile, Verizon) subsidize the cost

The problem with trying to lump commodities into "elastic" or "inelastic" groups:

• how frequently one must buy a particular item
• gasoline, milk: weekly
• iPhones: yearly or even less often; 

The two items that will cause the biggest problem for middle class Americans this year:

• restaurants
• home delivery

Likely to cause huge problem for middle class Americans this year if oil prices surge

• if oil prices surge, it will be interesting to "ask why" and see how analysts explain
  

Back to economics:

• gasoline: inelastic
• Americans will have to pay whatever the price is; no alternative; 80% of driving is required

• restaurants, home delivery: absolutely elastic, except for one thing:
• Americans have become addicted to both -- which, by the way, is in the definition above
  

I am completely unable to explain why gasoline has become so expensive. Everyone has opinions but none convince me. 

• new wrinkle: how much did the implosion of the EV sector contribute?