Gasoline and beer are monopolistic competition. But why the prices of gasoline always changes while beer's price is constant?
First of all, they are not monopolistic. There are plenty of companies making and selling both, and price fixing is illegal. The prices of beer periodically drop a bit just before holidays (and the price of gasoline goes up).
The answer they probably want to your question, for gasoline, is mainly that the raw material (crude oil) price fluctuates a lot. There is also a somewhat seasonal fluctuation of demand for gasoline, and periods when refineries shut down to change their formula to meet air pollution standards. This is, in California at least, always used as an excuse to raise prices.
The reason why the prices of gasoline often change while beer's price is relatively constant can be explained by several factors related to the nature of the markets they operate in.
Gasoline is a commodity that is influenced by various factors such as global supply and demand, crude oil prices, geopolitical events, and weather conditions. These external factors can cause fluctuations in the cost of producing and distributing gasoline. Additionally, gasoline is regularly traded on commodity exchanges, where its price can change rapidly based on market forces. Therefore, the prices of gasoline tend to be more volatile and subject to frequent changes.
On the other hand, beer operates in a market that is also characterized as monopolistic competition, but it has some distinguishing features that contribute to its relatively constant price. Beer is a differentiated product, meaning that different brands have their own unique characteristics and a certain level of brand loyalty. Due to this branding and customer preferences, individual beer brands can exercise some pricing power, allowing them to maintain a relatively stable price point over time.
Moreover, the beer market is less influenced by external factors that affect gasoline. The key cost drivers for beer production, such as ingredients like barley, hops, yeast, and manufacturing processes, are generally stable in comparison to the volatile oil markets. As a result, beer prices are less prone to sudden changes.
It is important to note that while beer's overall price may remain relatively constant, prices can still vary across different brands, regions, and stores based on factors like competition, marketing strategies, and regional variations in costs.
In summary, the differences in the factors affecting gasoline and beer, including supply and demand dynamics, external influences, and cost drivers, contribute to the contrasting price behaviors observed in these two markets.