At 07:47 PM 3/22/2004 -0800 Doug Pensinger wrote:
>Thanks for an informative answer. One follow up. I was under the
>impression that all prices have an energy component so that any price
>increases in oil would have a ripple effect on all prices. Wrong?
Only to the extent that all goods and services require energy as an input
to the production process.
Prices of goods at an Amish farmer's market, for example, would not be
expected to be affected by increases in energy prices.
Likewise, there is something to said for the size of the effect. If
energy only accounts for 1% of the production costs, then the ripple effect
of a 10% increase in energy prices could theoretically be expected to be
around 0.1% increase in the price. In practice, energy prices tend to be
very volatile and actual prices tend to be sticky, which is one reason why
people talk of a "core" CPI and PPI.
JDG
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John D. Giorgis - [EMAIL PROTECTED]
"The liberty we prize is not America's gift to the world,
it is God's gift to humanity." - George W. Bush 1/29/03
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