Microeconomic Analysis

In: Business and Management

Submitted By gandaar
Words 3533
Pages 15

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.


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…...

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