Final answer:
The statement about the increase in gasoline prices from 1918 to 2009 and its impact on the poor's ability to afford fuel considers inflation, purchasing power changes, and economic factors affecting price changes. Overall, real cost adjusted for inflation and income levels is essential in assessing the true affordability impact.
Step-by-step explanation:
The statement regarding the rise in gasoline prices from a quarter in 1918 to nearly $3 in 2009, making it more difficult for the poor to afford fuel for their cars, makes sense if we consider several economic principles. Firstly, we must take into account the concept of inflation, which refers to the general increase in prices and the fall in the purchasing value of money over time. Inflation means that the quarter in 1918 was worth much more in purchasing power than a quarter would be today. Therefore, a direct price comparison without adjusting for inflation does not provide a full picture.
Furthermore, factors that determine the price of gasoline include supply and demand dynamics, geopolitical events, production costs, and technological advancements. For example, if there is a disruption in oil supply due to geopolitical tensions or natural disasters, prices might spike. Similarly, increased demand for gasoline, perhaps during peak travel seasons, could cause prices to increase. Conversely, advancements in extraction and processing technologies may lower costs and thus gasoline prices, as seen in the price drop from June 2014 to January 2016.
It is also essential to consider the income growth over time, which may offset the impact of rising fuel prices. However, if income growth does not keep pace with the rise in gasoline prices, then purchasing gasoline could indeed become more burdensome for the poor. This illustrates a broader economic challenge where the poor disproportionately feel the effects of price increases in essential goods and services. Overall, while the nominal price of gasoline has considerably increased, the real cost adjusted for inflation and the average income levels must be analyzed to understand the true impact on affordability for the poor.