Friday, April 28, 2006

What do you think? A little long, but worth the consideration...

A man eats two eggs each morning for breakfast. When he goes to the grocery store he pays 60 cents a dozen. Since a dozen eggs won't last a week he normally buys two dozen at a time.

One day while buying eggs he notices that the price has risen to 72 cents. The next time he buys groceries, eggs are 76 cents a dozen. When asked to explain the price of eggs the store owner says, "the price has gone up and I have to raise my price accordingly."

This store buys 100 dozen eggs a day. I checked around for a better price and all the distributors have raised their prices. The distributors have begun to buy from the huge egg farms. The small egg farms have been driven out of business.

The huge egg farms sell 100,000 dozen eggs a day to distributors. With no competition, they can set the price as they see fit. The distributors then have to raise their prices to the grocery stores. And on and on and on. As the man kept buying eggs the price kept going up. He saw the big egg trucks delivering 100 dozen eggs each day. Nothing changed there.

He checked out the huge egg farms and found they were selling 100,000 dozen eggs to the distributors daily. Nothing had changed but the price of eggs. Then week before Thanksgiving the price of eggs shot up to $1.00 a dozen. Again he asked the grocery owner why and was told, "cakes and baking for the holiday." The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking, baking, etc. happen.

This pattern continues until the price of eggs is 2.00 a dozen. The man says "there must be something we can do about the price of eggs." He starts talking to all the people in his town and they decide to stop buying eggs. This didn't work because everyone needed eggs. Finally, the man suggested only buying what you need. He ate 2 eggs a day. On the way home from work he would stop at the grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.

The grocery store owner began complaining that he had too many eggs in his cooler. He told the distributor that he didn't need any eggs. Maybe wouldn't need any all week.

The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn't have any room for eggs and would not need any for at least two weeks. At the egg farm, the chickens just kept on laying eggs.

To relieve the pressure, the huge egg farm told the distributor that they could buy the eggs at a lower price. The distributor said, " I don't have the room for the %$&^*&% eggs even if they were free."

The distributor told the grocery store owner that he would lower the price of the eggs if the store would start buying again. The grocery store owner said, "I don't have room for more eggs. The customers are only buying 2 or 3 eggs at a time." "Now if you were to drop the price of eggs back down to the original price, the customers would start buying by the dozen again."

The distributors sent that proposal to the huge egg farmers. They liked the price they were getting for their eggs but, them chickens just kept on laying.

Finally, the egg farmers lowered the price of their eggs. But only a few cents. The customers still bought 2 or 3 eggs at a time. They said, "When the price of eggs gets down to where it was before, we will start buying by the dozen."

Slowly the price of eggs started dropping. The distributors had to slash their prices to make room for the eggs coming from the egg farmers. The egg farmers cut their prices because the distributors
wouldn't buy at a higher price than they were selling eggs for.

Anyway, they had full warehouses and wouldn't need eggs for quite a while. And them chickens kept on laying.

Eventually, the egg farmers cut their prices because they were throwing away eggs they couldn't sell. The distributors started buying again because the eggs were priced to where the stores could afford to sell them at the lower price. And the customers starting buying by the dozen again.

Now, transpose this analogy to the gasoline industry. What if everyone only bought $10.00 worth of gas each time they pulled to the pump. The dealers tanks would stay semi full all the time. The dealers wouldn't have room for the gas coming from the huge tank farms. The tank farms wouldn't have room for the gas coming from the refining plants. And the refining plants wouldn't have room for the oil being off loaded from the huge tankers coming from the Middle East.

Just $10.00 each time you buy gas. Don't fill it up. You may have to stop for gas twice a week but, the price should come down. Think about it.

As an added note...When I buy $10.00 worth of gas,that leaves my tank a little under half full. The way prices are jumping around, you can buy gas for $2.65 a gallon and then the next morning it can be $2.15. If you have your tank full of $2.65 gas you don't have room for the $2.15 gas. You might not understand the economics of only buying two eggs at a time but, you can't buy cheaper gas if your tank is full of the high priced stuff.

Also, don't buy anything else at the gas station, no cigarettes, no bread,milk or chewing gum, don't give them any more of your hard earned money than what you spend on gas, until the prices come down.

(hat tip to Richard @ 60s Beyond)


Shirl Fri Apr 28, 06:24:00 AM EDT  

great analogy, great advice Susan!

bryn Fri Apr 28, 08:01:00 AM EDT  

Watch bald eagles being born this w/e

Your Host Fri Apr 28, 08:35:00 AM EDT  

This is perfect. I'll be passing it around to as many people as I can.

Sudeaux Lux Fri Apr 28, 10:02:00 AM EDT  

Tiffany: So glad you think it's a good idea, too. I was floored when I read it.

Shirl: Makes sense, doesn't it? Now if we can only get the word out.

Bryn: I will definitely look into that. Thanks!

Mitch Fri Apr 28, 10:49:00 AM EDT  

No car so I can't participate but geez I need an omelette now!

Anonymous Fri Apr 28, 10:55:00 AM EDT  

Definitetly makes sense!

arratik Fri Apr 28, 12:46:00 PM EDT  

this is so much more sensible than that stupid "gas out" e-mail that tends to float around every time gas prices start to spike close to the beginning of tourist season...

thanks for posting this.

FunkyMama Mon May 01, 12:41:00 AM EDT  

I live in a state w/ a strong tourism-based economy ... you should see the tourism officials freaking out about gas prices (happens every year though!).

Would it really work? We'd still be buying as much gas, wouldn't we? Doesn't it make more sense to simply change our lifestyles so we use less in the first place?

protected static Mon May 01, 06:45:00 PM EDT  

I see one problem with this - the demand for gas is pretty inelastic, while eggs? Not so much. I can live without eggs - but how many people can live without gasoline? People are going to use the same amount of gas they always use, they'll just be spreading out their purchases - but buying the same quantity.

Gas will probably disappear from stations at the same rate - possibly even faster in, say, neighborhood stations as more people stop there (whoops! almost out of gas again! better fill up before I get on the road!) to make up for their lack of purchases elsewhere.

Now getting people to reduce their consumption and buy in smaller increments - that'd have an impact.

protected static Mon May 01, 06:46:00 PM EDT  

D'oh. What funkyjunky said, only with more words...


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