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- Stock Watch - Dollar Tree Stretches a Buck
- Fund Watch - Betting on Continued Growth in Asia
- Starting Out - Young, Prosperous and Frugal
- Value Added - Buy the Dow -- And Other Mega Caps
- Cash in Hand - What to Do With Cash in Hand
- Drive Time - Save Big on New Cars
- On the Job - Career Advice for Men
- Tax Tips - Need More Time?
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The rise in gasoline prices has hit my teenage son particularly hard. Peter must buy his own gas, so to make a few extra bucks he collects $2 a day from each of the kids he drives to and from school. At today's prices, that doesn't cover the cost of a weekly fill-up, but Peter is reluctant to charge more.
As a result, Peter's always on the prowl for the cheapest gas. He's even found a station that gives a discount of 2 cents per gallon if he pays cash.
High gas prices have been instructive in other ways as well. "Do you think gas will hit $4 a gallon?" Peter asked at dinner one night. "Barring another hurricane," I replied, "no."
Why are prices so high? Peter wanted to know. It's supply and demand, I told him. With people all over the world using gasoline and other petroleum products, and with nearly one-third of refining capacity in the U.S temporarily knocked out after the storms, the price was bound to go up.
Service-station owners must try to balance the cost of their product (more expensive because it's in short supply) with a price that customers are willing to pay.
In fact, that's just what Peter did several years ago when he decided to sell his Pokemon trading cards at school. He figured that if he bought a pack of cards for $3, he could resell it for $4. And if two kids wanted the same card, he explained, "whoever brings more money gets it."
For kids, understanding how the economy works is just as important as learning how to manage money. But judging by the confusion among adults in the face of high gas prices, children aren't the only ones who need a lesson in capitalism.
"Which human being in America sets the price of a gallon of gasoline?" blustered one commentator. " 'Somebody' tells your local gas-station owner exactly what to charge."
No, "somebody" doesn't -- just as "somebody" didn't tell Peter what to charge for those Pokemon cards.
Kids should be learning about all of this in school, but formal economic education is about as scarce as gasoline after a hurricane. In fact, many Americans would be hard-pressed to explain the system that makes their country tick.
Next week: A simple lesson in how the economy works.
