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Are Recessions Good for Gas Prices?

Eric Nielsen, St. Louis Community College Meramec
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This material was originally created for Starting Point: Teaching Economics
and is replicated here as part of the SERC Pedagogic Service.


In this activity students will be investigating the effects of supply and demand on weekly prices of gasoline in the United States from 2006-2010. Students will use FRED data from the St Louis Federal Reserve to investigate the change in conventional gasoline prices (in dollars per gallon) over time and in particular during recessions.
The factors that impact gasoline prices can be explored and how those variables change over time and during a recession. Students will have the opportunity to interact with another student to present and report the difference between impact factors on supply and demand on the price of gasoline during a recent recession period.

Learning Goals

Using FRED- finding and utilizing real data for impact comparison
Supply and Demand- investigating changes and impacts in equilibrium prices. This will become useful when analyzing real world changes (when both supply and demand shift) to identify potential impact factors.

Context for Use

Principles of Microeconomics, after the factors that shift the supply and demand curves have been presented.

Description and Teaching Materials

The assignment takes the students through the finding of the information on the St Louis Federal Reserve's website, how to modify it to view the recession during 2006-2010.
This activity allows students to work as part of a group, because without the partner the students will not be able to complete the writing assignment.
Student Handout for Gas Prices (Microsoft Word 2007 (.docx) 14kB Jun2 13)
Supervisor Memo (Microsoft Word 2007 (.docx) 13kB Jun2 13)

Teaching Notes and Tips

The students will need to be divided into pairs for supply and demand, then paired up to think and discuss which of the factors they feel creates the largest impact on the change in gas prices. After the activity has concluded, students can either be asked assessment questions (quiz where both supply and demand shift) or write a brief describing the major impacts on gasoline prices. In the writing assignment, the students will be evaluated on their ability to describe the impact they investigated (demand or supply) and how well they included their partner's argument (the opposite view).


Posttest- Textbook example where both supply and demand shift can be used to realize student understanding (Technology changes in production of electronics and celebrity endorsement on the impact of smart phones)
Writing- The students will be evaluated on their ability to describe the impact they investigated (demand or supply) and how well they included their partner's argument (the opposite view).

References and Resources

Gasoline Prices, Fuel Economy, and the Energy Paradox; Hunt Allcott, Nathan Wozny; NBER Working Paper No. 18583, Issued in November 2012
NPR: http://www.npr.org/templates/archives/archive.php?thingId=132416598
WSJ: http://online.wsj.com/article/SB10001424127887324767004578489130300876450.html
NY Times: http://topics.nytimes.com/topics/reference/timestopics/subjects/g/gasoline_prices/index.html
CNN Money: http://money.cnn.com/news/specials/gasprices/