The impact of gasoline price changes on food expenditures

ABSTRACT

This paper examines the effect of gasoline price changes on consumer spending behaviour, specifically on food at home (FAH) and food away from home (FAFH) expenditures using monthly data from 1997–2022. We employ the Almost Ideal Demand System (AIDS) to estimate the cross-price elasticity of FAH and FAFH with respect to the price of gasoline. Our results show a negative relationship between gasoline price changes and FAH and FAFH expenditures. The results indicate that when the gasoline price doubles, FAH and FAFH expenditures drop by about 3% and 6%, respectively. This suggests that consumers adjust their food spending patterns in response to changes in gasoline prices, with a more substantial impact on FAFH expenditures.

KEYWORDS:

• Food at home
• food away from home
• gasoline
• cross-price elasticity

JEL CLASSIFICATION:

• D12
• E21
• E31

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Source: U.S. Bureau of Labor Statistics.

² Source: United States Department of Agriculture (USDA).