in gas prices. why we dont use the nine in money? example: 2.019?

Question

My teacher says its in the thousandth place, then he asked why we dont use the nine in gas prices in money?

Answer 1

The reason we don't use the nine in money is for the same reason that there is talk of elimating the penny. It simply isn't cost efficient. Coining money worth less than a penny is not efficient, as it costs more to coin it than it is worth. The half cent went out of use in 1857 (long before gasoline was being consumed). The tax on gasoline was established by the government, and they don't mind rounding up when it comes to the tax amount.

Answer 2

Commodities, like oil or wheat, are traded in large quantities, in thousands or millions of barrels or bushels, so greater divisions than just dollars and cents are needed to accurately reflect trading price steps for bids and offers. For example a oil contract might be for 10,000 barrels, the smallest incriment for price changes would be $10 if 1/1000th of a dollar is used, but the smallest increment possible if cents(1/100th of a dollar) where used would be $100.

When selling at retail, which normally involves small quantities, there is no option to pay in any value less than 1 cent since there is not coin or currency value lower than one penny.

Answer 3

The answer is rather simple. The taxes were actually set back when we used half-cents. As such, it's actually 2.01 1/9. If the US Mint were allow half-cents back into circulation, it would make more sense to everyone.