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Ed Dolan’s Econ Blog By One Measure, the Cost of Driving is Now Lower than Ever Before Dec. 29, 2014 Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.

How Much Does it Cost
to Drive Your Car a Mile?  When you think of the cost of driving your car a mile, you probably think of the out-of-pocket cost—the money you pay at the pump  Economists, instead, like to look at the opportunity cost—what did you have to give up to drive a mile?  One way to measure opportunity cost is to ask, how many minutes do you have to work to buy the gas you need to drive a mile? Dec. 29, 2014 Ed Dolan’s Econ Blog Workers assemble flywheels for Model T cars in a 1913 Ford assembly plant

How to Calculate Opportunity Cost
The opportunity cost of driving, measured in minutes worked per mile, depends on three things:  Your wage, in dollars per hour  The price of gasoline in dollars per gallon  The efficiency of your car in miles per gallon Dec. 29, 2014 Ed Dolan’s Econ Blog Example:  You earn $18 per hour  Gas costs $3.00 per gallon An hour’s wage buys 6 gallons of gas, or 10 minutes of work per gallon  Your car gets 25 miles per gallon Ten minutes work gets you 25 miles, which means the opportunity cost of driving is 0.4 minutes (24 seconds) worked per mile

1919: 1.7 Minutes per Mile
 In 1919, a nonsupervisory worker earned about 50 cents per hour  A gallon of gasoline cost about 25 cents  A Model T Ford got about 17 miles per gallon  That works out to about 1.7 minutes per mile Dec. 29, 2014 Ed Dolan’s Econ Blog 1919 Ford Model T Highboy Coupe

1935: 1.2 Minutes per Mile
 In 1935, a typical worker earned about 56 cents per hour  A gallon of gasoline cost about 17 cents  A Ford V-8 got about 15 miles per gallon  That works out to about 1.2 minutes per mile Dec. 29, 2014 Ed Dolan’s Econ Blog 1935 Ford Phaeton

1950: 28 Seconds per Mile
 By 1950, a typical worker earned $1.59 per hour  A gallon of gasoline cost 18 cents  A Ford V-8 got 14 miles per gallon  That comes to just under half a minute per mile Dec. 29, 2014 Ed Dolan’s Econ Blog 1950 Ford Custom Tudor

2014: 11 seconds per Mile
 By December 2014, an average nonsupervisory worker earned $20.74 per hour  A gallon of gasoline averaged $2.40  My 2014 Ford Fiesta* is rated at 36 miles per gallon (although it actually does a little better than that)  At that rate, it takes just 11 seconds to earn enough to drive a mile *Eco-boost gasoline engine, 3 cyl, 1 liter, turbocharged, not a hybrid Dec. 29, 2014 Ed Dolan’s Econ Blog My 2014 Ford Fiesta

The 100-Year Trend  This
chart shows the entire 100-year trend, based on the average wage of production and nonsupervisory workers and the US average gasoline price  The red points and trend line are based on selected popular Ford models  The blue line is based on the average fuel economy of all cars on the road, both old and new  The bottom line: If you drive Ford’s most efficient gasoline model (excluding electrics and hybrids), the opportunity cost of driving is at an all time low Dec. 29, 2014 Ed Dolan’s Econ Blog

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