Microeconomic Analysis

In: Business and Management

Submitted By gandaar
Words 3533
Pages 15
INTRODUCTION TO THE SITUATION

In this scenario, an investor is considering the purchase of two gas stations and has requested advice about the business feasibility of the venture. This analysis will look at the past, present and potential future demand for gasoline, the availability of sufficient gasoline supply, as well as a recommendation about the desirability of undertaking the venture. Crude oil prices have fluctuated over the past several years, but have steadily risen which translates into a rise of gasoline at the pump. This has made it appear appealing to venture into this business. On the other hand, people are very tired of high fuel prices and how rising fuel prices seem to drive up the price of consumer goods, utilities and touch almost anything consumers would have a desire for.

According to an article published on the Forbes website in 2012 [1], the worst is not over. The last two years has proven this not to be true. Although there have been a number of spikes in gas prices, the prices in 2014 have been reported to be the lowest since 2010. This could lead to lower profits for a variety of reason that this paper will examine.

Opening up or purchasing one or more gas stations represents a substantial outlay of cash, or obtaining large loans, or a combination of the two. The investment in the gas stations is based upon the premise that the gas stations will produce enough revenue to pay debts, as well as provide enough income to pay off loans or provide a return on the initial investment. On-going maintenance and other costs would have to be considered before a purchase decision is made.

DEMAND DETERMINANTS

Gas prices have risen and fallen over the years following supply and demand. It appears that demand for gasoline is decreasing and this could mean problems for a newly opened or newly acquired gas station business. As…...

Similar Documents

Microeconomics

...Introduction: Research and analyze the effects of the following government policies on the market equilibrium. Increases in the Minimum Wage Restrictions on International Trade Pollution Controls Natural Monopolies and Antitrust Regulation When analyzing these policies, include some discussion of the following points when appropriate: What is the purpose of the policy? Why is the policy necessary? The welfare of consumers, producers, and society (the winners and losers) before and after the policy The distribution of costs and benefits Does government intervention improve the situation? Course Objectives Tested: 1. Explain key microeconomic terminology. 2. Differentiate between microeconomics and macroeconomics. 3. Create and use economic graphs and numerical models to analyze and solve microeconomic problems. 4. Explain the costs and benefits of international trade, including calculation of gains from trade. 5. Analyze the impact of government activity in markets. 6. Determine optimal consumer buying decisions in the context of utility theory. 7. Compare and contrast optimal pricing and output decisions in various market structures. 8. Apply supply and demand theory to both product and factor markets. PROJECT SUBMISSION PLAN |Project Part |Description/Requirements of Project Part | |1 ......

Words: 1770 - Pages: 8

Microeconomics

...the more you receive. --------------------- References: http://www.pitt.edu/~upjecon/MCG/MICRO/PPF/PPF.html Grading Rubric |Microeconomics: Unit 2 Assignment: PPF| | |and Opportunity Costs | | |Content |Points Possible| |Draw production possibility frontier (PPF) |3 | |Analyze feasible/infeasible production |2 | |Compute opportunity cost of increasing annual products |6 | |Explain the slope of the production possibility frontier |2 | |Analysis | | |Work demonstrates synthesis of concepts, research, and experience |3 | |Work demonstrates the student’s ability to tie relevant information to real-life |2 | |applications. | | |Analysis exceeds basic comprehension to demonstrate higher-order thinking. |2 | |Writing Skills ......

Words: 406 - Pages: 2

Microeconomics

...Charles  Zoller     Principles  of  Microeconomics   Final  Paper   12/8/12       Selfish  Reasons  to  Have  More  Kids       In  Selfish  Reasons  to  Have  More  Kids:  Why  Being  a  Great  Parent  Is  Less  Work  and   More  Fun  Than  You  Think,  Bryan  Caplan  describes  why  it’s  in  a  parent’s  best  interest  to   have  more  kids  than  they  originally  planned  on  having,  and  spacing  the  time  between  when   a  couple  decides  to  have  children.    Economic  principles  obviously  encompass  the  ability  to   influence  the  views  and  measures  of  people  for  the  better.    These  principles  are  not  just   meant  for  stockbrokers  and  economists,  but  they  give  the  average  person  a  method  of   sorting  through  the  obstacles  of  society  from  an  economic  standpoint.    Since  economics  is  a   study  of  choices,  and  we  make  hundreds  of  choices  each  day  without  even  acknowledging   them,  it  is  unmistakable  that  economics  can  be  found  ubiquitously.       The ...

Words: 1456 - Pages: 6

Environmental Analysis-Microeconomics

...Environmental Analysis – Microeconomics Historically, the breakfast cereals industry had become prominent and successful due to its Oligopoly structure of market where there was small number of large players in the industry. Under Oligopoly, there was difficulty for the small players to penetrate the market. This was in fact evidenced by the “antitrust” complaint filed by the FTC which argued that the incumbent firms (the Big Three) had effectively discouraged small firms to enter the industry. How was it done? It was observed that the Big Three used marketing strategies such as but not limited to 1. Trade Dealings - which offers discounts to retailers or special promotion 2. In pack Premiums –where cereal packages include toys and gifts 3. Vitamin-Fortification 4. Distribution of coupon Indirectly these giants also took advantage of the economies of scale which also enhanced their profitability. Profitability is one big factor that makes a business remain and becoming a leader in the industry. The Big Three also made use of their influence in the food stores, supermarkets, etc. by taking display slots in their stores making their product visible to the buyers/consumers. Variations in the product offerings and product innovations/differentiation also played an important role in the success of branded cereal industry as these give the consumer large scale of options of which product to grasp. Cumulatively, above business tactics/activities apparently can......

Words: 749 - Pages: 3

Microeconomics

...2. In your analysis, please make sure to explain your reasoning and relate your answers to the characteristics of the determinants of the price elasticity of demand. 2. ------------------------------------------------- Externalities Explain the difference between a positive and negative externality. In your analysis, make sure to provide an example of each type of externality. Why does the government need to get involved with externalities to bring about market efficiency? What solutions need to be provided for your examples? Chapters 4, 5, & 6 3. Short and Long Run Let’s assume that you own a fast food restaurant and you are faced with many customers each day eating in the restaurant without any tables. Describe the difference between the short run and long run in the example to bringing about more tables for the customers. How is the restaurant able to differentiate between the short run and long run? 4. Fixed and Variable Costs After reading Chapter 8 in the text and viewing the required video for this week, Fixed, variable, and marginal cost, address the following in your initial post: 3. First, describe several different fixed costs and variable costs associated with operating an automobile. 4. Next, assume that you would like to travel from Los Angeles to New York City by either car or plane. Which costs would you take into account in making your decision, fixed costs, variable costs or both? Make sure to explain your analysis in the......

Words: 549 - Pages: 3

Competitive Analysis Microeconomic 365

...Current Market Conditions Competitive Analysis Abelardo Garcia, Alexander Gamez, Andrew Sullivan, Doye Barksdale, Edward Tyson ECO/365 July 31, 2014 Mr. Jerry Peck Current Market Conditions Competitive Analysis The thesis of this paper is that the current market conditions are very competitive for every type of field industry in cooperate America today. In this paper, I will discuss Ford’s new product called Siesta. Our team will help Ford Auto Maker to determine the release of the new electric two door car by analyzing Ford’s primary competitor the Smart Car, and with strategic planning surrounding pricing, innovation, labor and cost structure. Siesta will be a successful innovation product for Ford Auto Maker, considering the type of market conditions today. Organization History and New Product Ford Motor Company is an American automaker by Henry Ford, and was one of the largest automaker in America based in the state of Detroit. Ford was the leading worldwide vehicle sales for the majority 1900’s and most profitable auto company in the world. But with oversea car companies entering the States such as Honda, Hyundai and Toyota, Ford sales have been trending below average due to gas prices, unemployment rate, and low competitive price points. People are looking for alternatives, which will save money in long term. Ford has produced a new product that will align with their consumers’ needs. The new product is a two door electric car, only costing under $10,000......

Words: 1095 - Pages: 5

Econ 545: Business Economics Project Two: Microeconomic Analysis

...ECON 545: Business Economics Project Two: Microeconomic Analysis Situation B For Situation B, Cindy is looking at investing into the renewable energy industry. She is looking at one section of the industry to invest in, which is that of contracting the installation of solar panels. Cindy, has read, that families and businesses are saving money by going to solar for their power needed. Also, that there are government back regulation to make solar more assessable to people. For Cindy, she is looking pass the business opportunity for installing solar planes, but that this product can reduce pollution and help save the environment. GDP and Solar Energy In the United States and most nations in the world, energy is vital in keeping society stable and expanding. Energy provides the ability to aid in transportation, activities in daily living and employment. In the United States, $1.2 trillion dollars were spent on energy in 2013 or 8.3% of the GDP. That translates into an annual cost of 3,895 dollars per person was spend on energy consumption. With the great environmental impact seen by the production of energy, there was been more of a call, for renewable energy forms, as that of solar panels. The United States dose consumes 19% of the world’s energy supply and a 19% total of the world’s GPD. With the large needed for energy, companies are looking for new way to produce this produce that cost less and reduces the environmental impact. Renewable energy consumption is......

Words: 3274 - Pages: 14

Project 1 – Microeconomic Analysis

...Project 1 – Microeconomic Analysis Donald Cole ECON545 – Business Economics Date: September 18, 2014 Situation C The situation that I personally thought would correspond with today economy would be situation C. Situation C basically states that Edgar has a business idea of buying two gas stations for profit situations. Edgar is asking for advice on buying these two gas stations before taking action on his business idea. Hopefully, by the end of this documentation, I would give Edgar enough information to decide on what to accomplish on his business idea. My research is going to consist of the demand and supply of gasoline. It’s going to consist of the comparison between the prices in the different countries and possible states. I will also have graphs to show all the different factors that would help Edgar situation on his business idea. The first situation that I see is that you’re buying two gas stations that don’t have a start of plan like a name for the gas station. You also don’t have a general location to put the two gas stations. Do you even know what type of gasoline are you planning on selling to the customers? Those are some things that need to go into a detail plan before you just jump right out in the midst of buying a gas station. Let’s start with the basic information of a particular name for the company. Some of the popular gas stations that is used in the United States are BP, Citgo, Chevron, Marathon, Phillips 66, and more (Gas Stations...

Words: 625 - Pages: 3

Microeconomics

...TYP: RE 47. Microeconomics approaches the study of economics from the viewpoint of: a. | inflation, unemployment, and economic growth. | b. | the federal government. | c. | individual economic units, such as consumers, firms, and units of government. | d. | the economy as a whole. | ANS: C PTS: 1 DIF: Easy REF: Full: 6 | Mic: 6 TOP: Microeconomics TYP: RE 48. The basic difference between macroeconomics and microeconomics is: a. | microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. | b. | microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. | c. | microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. | d. | microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment. | ANS: C PTS: 1 DIF: Medium REF: Full: 6 | Mic: 6 TOP: Microeconomics TYP: RE 49. Determining the price of compact discs is a concern of: a. | macroeconomics. | b. | microeconomics. | c. | both macroeconomics and microeconomics. | d. | neither macroeconomics nor microeconomics. | ANS: B PTS: 1 DIF: Medium REF: Full: 6 | Mic: 6 TOP: Microeconomics TYP: RE 50. Which of the following is the best example of a microeconomic topic? a. | The......

Words: 9136 - Pages: 37

Microeconomic Analysis

...Project 1 The purpose of this report is to investigate the impact of a proposed excise tax on consumers and the relevant industry. More specifically, this report discusses a proposed 1% “fat” tax (i.e. an excise tax) on a brand of soda and the resulting effect on its customers as well as the supermarket chain that distributes the soda. Using calculations derived from the demand function provided, this report analyzes the proposed excise tax and argues that an income tax, rather than an excise tax, would be a better alternative for the government to generate the same amount of tax revenues as the “fat” tax. In order to comprehend the situation at hand, one must have a basic understanding of the elements of demand, optimal output, price and revenues. Demand, along with supply, is the determining factor of the prices and quantities of goods that are bought and sold in the market. To take this case as example, demand illustrates the quantity of soda consumers would like to purchase at each price. Optimal output refers to the amount of soda produced that will maximize the supermarket’s level of profits. In terms of price, it is the amount of money that the consumer must spend to obtain one unit of soda. Knowing the price and the quantity of soda sold will allow one to obtain revenue, which is the income received by the supermarket from the sale of soda. According to the calculations done given the demand function, the pre-tax soda output is 29469 oz. at a price of $0.017037......

Words: 717 - Pages: 3

Econ545 Microeconomic Analysis

...NATELLA SARGSYAN ECON545 MICROECONOMIC ANALYSIS Instructor: William Mapp Introduction Jenny, my niece, has asked me for an advice about a carrier choice that she is trying to make. Jenny wants to become a dentist. We discussed the topic of high tuition and hard work required on the way of achieving the degree. Jenny knows that I am taking a course in Business Economics and is waiting to my research based advice on whether to become a dentist or not. She also wants to know my opinion on the best location to practice it in the USA. Dental Market Demand. On the market of dental services two sides can be identified; they are the patients who represent the demand side and the dentists who are on the supply side. The suppliers-dentists- provide treatment for their patients in exchange of certain payments. These payments are to cover operating costs such as dental supplies and equipment, staff salary, marketing, space rental and so on. The patients who are in need of those services are concerned about the financial expenditures to receive it. There are two ways to pay for the services from the patients’ side: to purchase a dental insurance or to pay for the treatment. Most of the dental insurances are provided by employers. Some of the plans cover the treatment for 100% other plans cover a portion of the treatment leaving the other portion for the patients to pay. The demand theory states that services or goods are the objects of taste and preference of people.......

Words: 1232 - Pages: 5

Econ545 Project1 Microeconomics Analysis

...Nonlapan Burimsittichai Ungkana Lukkanavej Econ545: Project 1 – Microeconomic Analysis January, 26, 2015 Introduction In the previous years we have been experiencing a shortage on the supply of physicians, issue that according to the projections will not be changing any time soon. Given this situation we could probably already answer the question and risk to say that it is a good idea economy-wise to become a doctor, seeing that at least for the next 10 years the supply will not be anywhere close to satisfy the demand. There’s many factors that affect this increase in demand such as aging of population, the Baby Boomers that want to remain active and look for and use more healthcare as well as the next generations after them. It is also important to mention that an increase on productivity of healthcare could reduce the gap between demand of supply, but after many years and different attempts almost nothing has been achieved, since healthcare has become more and more complex. Here is a little extract from AAMC website talking about the issue of physicians shortage of supply: The number of federally funded residency training positions was capped by Congress in 1997 by the Balanced Budget Act. The 26,000 residency positions available for first year trainees will not be enough to provide training for the students graduating from medical school as early as 2016. In addition, Medicare support of graduate medical education (GME) includes paying its share of the......

Words: 2957 - Pages: 12

Difference Between Microeconomics and Microeconomics

... Differentiate between Microeconomics and Macroeconomics Name Institution Differentiate between Microeconomics and Macroeconomics According to (Krugman, 2005), Microeconomics involves analysis of individual economic units such as households, demand, and supply and market equilibrium. Macroeconomics, on the other hand, includes analysis of aggregate economic variables such as national income, inflation, unemployment and interest rates. My primary objective in this paper, therefore, is to differentiate between macroeconomics and microeconomics. This fact alone cannot distinguish macro and microeconomics. Nevertheless, microeconomics and macroeconomics are interdependent. While analyzing macroeconomics an economist has to ask questions which affect the standards of living of an entire country. Such issues will be related to inflation, unemployment, national income, product markets, fiscal policies, international trade, economic growth and interest rates (Mankiw, 2007). On the other hand, an economist while analyzing Microeconomics will look at individual’s purchasing power, demand, supply, income, utility level, labor markets, production, consumption and opportunity cost. Macroeconomics is concerned with the national income and the gross domestic product while Microeconomics is concerned with the impact of an increase or decrease in a single economic variable (Krugman, 2005). Microeconomics works on the principle that prices of goods and services are determined by......

Words: 303 - Pages: 2

Microeconomics

...AFRICA NAZARENE UNIVERSITY NAME: IAN GATHAIYA MUHORO ID NO: 08JBT021 UNIT: MICROECONOMICS UNIT CODE: BCM 104 LECTURER: PETER MUHIA TOPIC: ANALYSIS OF THE FACTORS OF PRODUCTION DUE DATE: 14TH JUNE 2012   PRODUCTION INTRODUCTION According to David N Hyman, (1989), production is the process of using economic resources or inputs in order to produce output. The transformation of raw materials into finished goods or services has been a major factor in any economy as this is the major attributes that has help build today’s economy since the beginning of most economies worldwide. Production on its own is insignificant as there are several factors to consider when producing the end product. This is what is known as the factors of production. FACTORS OF PRODUCTION There are several factors of production to consider. They are; a) Capital b) Scarcity c) Technology d) Cost of production e) Opportunity cost f) Fixed cost and variable costs g) Production possibilities h) Resources i) Price The above factors each affect production in their own way. A deeper look into them will reveal each of these factors’ contribution to the production process. A. Capital Capital, according to Ronald M and Robert A, (2003), this is anything that is produced in order to increase productivity in the future. Along with human capital, there is physical capital, which includes buildings, machinery and other equipment. Capital can also be monetary which is required to boost......

Words: 2253 - Pages: 10

Microeconomic Analysis

...Milton Friedman in his article “The Social Responsibility of Business is to Increase its Profits” states that only people can have responsibilities, and that there is not such a thing like social responsibility of business. A corporation, according to Friedman, is an artificial person and, therefore, may have artificial responsibilities. The individuals who are responsible of the corporation are businessmen, which are individual proprietors or corporate executives. A corporate executive is employed by the owners of the business. And its responsibility is to conduct the business in a way that maximizes the profits while conforming to the basic rules of the society. A corporate executive, as any other person, may have many other responsibilities that he recognizes or assumes voluntarily, which can be referred as “social responsibilities.” These social responsibilities correspond to individuals, not to businesses. The main objective of corporate executives is to maximize the profits of all stockholders; therefore, they are to act in a way that is in the interest of those owners of the business. In this sense, a corporate executive shall not engage in social activities, unless they are done from an individualistic point of view instead of from a business point of view because, in the last case, he or she would be spending somebody else’s money, and not serving the interests of the employers. On the other hand, the situation of the individual proprietor differs because, if he......

Words: 1387 - Pages: 6