St. Joseph Equipment is a farm, construction and forestry equipment dealer that can have as many as 50 vehicles on the road at any time.
So when gas prices went up, the La Crosse, Wis., business, felt the pinch.
The company's fuel prices rose 30% over a year, forcing its owners to pass the additional costs to their customers.
"We have to be careful what our competition is doing," said co-owner Sherry Wuebben, adding, "we are certainly passing on as much as we can."
via money.cnn.com
Higher gas prices (and input) decreases the supply of final products and increases final product prices. The degree to which the price increase will be passed through to (absorbed by?) customers depends on the elasticity of demand--that is, how responsive customers are to price changes. The less responsive to price changes (the more inelastic is demand), the more the price increase will be passed through to consumers. If there are readily available substitutes for the final product as seemes to be indicated by "We have to be careful what our competition is doing," demand will be more elastic and the degree to which the higher fuel costs can be passed through will be lessened.
