Making pricing decisions for gasoline

ECON Paper Project 1

  • The details to the assignment is outlined below
  • The paper should be based on “Situation C”
  • The paper should be at least 5 pages using at least 5 references
  • APA format is required – Times New Roman – 12 pt font – double space
  • Refer to the outline attachment as a guide

 

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Situation C

Cousin Edgar is always thinking of the next business idea. This time, he plans to invest in buying two gas stations. He reckons American consumers have come to accept the high gasoline prices, and estimates world prices for gasoline will increase even further due to increasing high demand from India and China. Besides, Cousin Edgar thinks he will make a good profit on the sale of convenience items at each station. But before buying the gas stations, he decides to ask for your advice since you are taking this course in Business Economics.

You recall reading about making pricing decisions for gasoline on pages 173-174 of the textbook. You also recall reading about perfectly competitive markets in Chapter 12, and the need for differentiation in Chapter 13. Being skeptical of Cousin Edgar’s optimism on the profitability of selling gasoline and convenience items, you decide to research the market in terms of supply and demand, elasticity, costs of production, pricing, and normal profit. You want to provide Cousin Edgar with the most informed advice possible.

The following is a list of the specific required information, research, graphs, and math to be included in each answer regardless of the scenario chosen.

  • Demand Determinants:
    • Each individual determinant analyzed for your situation, with examples applicable to your situation (3 points each) and research (2 points each) showing current demand data or most recent past data, except for the expectations determinant in which you need to use data estimating future market conditions.
    • (10 points) Price Elasticity of Demand facing you in your scenario, including actual calculation of it using the midpoint formula. If you can’t find data, then determine the price elasticity from the characteristics and make up numbers to use. Be sure to identify this if you use this approach. This will help you in deciding the slope of your demand curve below.
    • (5 points) Graph the demand facing your situation. Note that this requires information from the supply determinant analysis before deciding how to draw the curve(s), as you may need a separate MR curve.
  • Supply Determinants:
    • Each individual determinant analyzed for your situation, with examples applicable to your situation (3 points each) and research (2 points each) showing current supply data or most recent past data, except for the expectations determinant in which you need to use data estimating future market conditions.
      • (20 points) You need to be very specific in the cost of production determinant to identify fixed, variable, and marginal cost in order to derive your supply curve for the graphing component. You will need to explain and show how profit maximization or loss minimization output and price are determined. You will need to do the math using actual figures [cited] or your own estimated figures [identified as such] and explain why you expect short run economic or normal profits, acceptable loss or temporary shutdown, and how you will know which it is.
      • The number of sellers determinant must contain your analysis of the kind of market structure in which your firm or labor service will be sold.
    • (10 points) Price Elasticity of Supply you have based on the cost of production changes as output changes, including actual calculation of it using the midpoint formula. If you can’t find data, then determine the price elasticity from the characteristics and make up numbers to use. Be sure to identify this if you use this approach. This will help you in deciding the slope of your supply curve.
    • (5 points) Graph your supply situation using the numbers from your earlier cost of production analysis.
  • Recommendations—(40 points) what are your recommendations explained by your analysis?
  • Paper presentation—(10 points) good format, citations, lack of spelling errors, etc.

Microeconomic Paper as a Professional Report

 

Your paper should be organized into five parts as listed below.

 

1.Title Page—Name, course, and date

  • Introduction to situation, but do NOT copy the scenario. Briefly summarize the situation and identify the microeconomic issue(s) to be decided from the perspective of the organization.
  • Relevant Economic Principles: Determinants of Demand, Supply, etc. and Relevant Data
  • Recommendations and Economic Justification

Identify the variables that are critical in addressing the issue(s). Gather and present the relevant data on the variables by searching the DeVry Online Library. Ask a librarian for help if needed. Use in-text citation to report the source(s) of the data. Graphs may be included here.

Formulate and present your recommendations for addressing the issue(s) based on the relevant data and economic principles identified above. Justify your recommendations in terms of the economic impact on those affected.

5.References

List the full references for at least five sources alphabetically in APA format.

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