ECON 545: Business Economics

ECON 545: Business Economics

Question

ECON545: Project 1—Microeconomic
Analysis

The
Microeconomic Paper tests your ability to apply economic principles to a
business decision. Select one situation from the items outlined below: A to D.
Complete the paper on the selected situation as specified below. The completed
paper is a professional report and is due in Week 3 (230 points). See the
grading rubric at the end of this document. Be sure to use the DeVry library
for finding data; avoid questionable sources, such as Wikipedia.

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.

1. Demand Determinants:

a.
Each individual determinant analyzed for your situation, with
examples applicable to your situation (5 points each) and research (3 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.

b. 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.

c.
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.

2. Supply Determinants:

a.
Each individual determinant analyzed for your situation, with
examples applicable to your situation (5 points each) and research (3 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.

i.
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 Shut Down and how you will know
which it is.

ii.
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.

b. 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.

c.
Graph your Supply situation using the numbers from your
earlier Cost of Production analysis.

3. Recommendations—what are
your recommendations explained by your analysis?

4. Paper presentation—good
format, citations, lack of spelling errors, etc.

Situation A

Jenny,
your niece, is a smart high-school student who wants to make intelligent
choices for her future. Hearing of your course in business economics, she has e-mailed
you asking for advice on whether to become a doctor and on the best location to
practice it. She recognizes the high costs of tuition and the years of study
involved in becoming a doctor. She wants to evaluate if that career choice is
an optimal decision for her, so she has asked you for advice.

Having
read the piece “Fewer Physicians Move, a Sign of Career Caution” on page 20 of
the textbook, you recognize the significance of such a career decision for
Jenny. You decide to educate yourself about the market for physicians in terms
of supply and demand, elasticity, costs of production, pricing, and economic or
normal profit or loss. You want to provide Jenny with the most informed advice
possible.

Situation B

Your
neighbor Cindy wants to start a contracting business for installing solar
panels. She has heard of the cost savings that households and businesses can
make each year by installing solar panels on their roofs. Cindy has also heard
of government incentives for installing solar panels. Being concerned about the
environment and wishing to reduce pollution, Cindy thinks installing solar
panels also serves a good social purpose. But she does not want to risk her
life savings on a venture that might not succeed or become profitable enough.
After hearing from you about taking this course in business economics, she
decides to ask you for advice.

At
first you are hesitant to give investment advice. Then you read the piece “US
boosts ‘game-changer’ solar technology in bid for global market share” on page
374 of the textbook. You realize there are more pieces to the decision than
Cindy is considering. You decide to research the market in terms of supply and
demand, elasticity, costs of production, pricing, and economic or normal profit
or loss. You want to provide Cindy with the most informed advice possible.

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 to
increase even further with 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 because you are taking this course in business economics.

You
happened to read the piece “$4-a-Gallon Gas Fueling Fears for Recovery” on page
196 of the textbook. 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 or economic profit or loss. You want to provide Cousin
Edgar with the most informed advice possible.

Situation D

After
hearing of you taking this course in business economics, Uncle Dan has e-mailed
you asking for advice on his 100-acre corn farm. He mentioned how, after 30
years of growing corn, he wishes to leave that commodity’s market and enter a
more profitable market instead. He is thinking of planting some organic crop.
But he is not sure which crop would be most profitable. He already knows that
going organic requires changing some of his practices to qualify for the
certification. Therefore he wants to know how much it costs to become a
certified organic farmer, and which crop would be best suited for him to grow
given his current equipment.

Luckily
before you can find time to answer Uncle Dan’s e-mail, you read the piece on
organic farming in the United Kingdom on page 422 of the textbook. Recognizing
the costs and risks for Uncle Dan in making the switch, you decide to research
the market in terms of supply and demand, elasticity, production costs,
pricing, and economic or normal profit or loss. You decide to educate yourself
about organic farming so that you can provide Uncle Dan with the most informed
advice possible.


Microeconomic Paper as a
Professional Report

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

1. Title Page—Name, course, and date

2. 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.

3. Relevant Economic Principles: Determinants
of Demand, Supply, etc. and Relevant Data

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.

4. Recommendations and Economic Justification

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.

Grading Rubric

Section

Points earned

Points

Description

Paper
Presentation

2

Good format,
citations, lack of spelling errors, etc.; correct Title page and Reference
pages

Relevant Data:
Demand:

Supply:

5

Demand Determinants
and research data (40 points)

Price Elasticity
of Demand (20 points)

Graph of Demand (10
points)

Supply Determinants
and research data (40 points + Profit Max/Cost of Production analysis = 40 points
for total of 80 points)

Price Elasticity
of Supply (20 points)

Supply graph (10
points)

Recommendations

3

What are your
recommendations explained by your analysis?

Total

10

ECON 545: Business Economics


Attachments
ECON545_-_Project_1—Microeconomic_Analysis.docx (52.68 KB)

Preview: take xx this xxxxxxxx This is xxxxxxx this sector xx set xx xxxx exponentially xx the future xxx projected fall xx solar xxxx xxxxxx will xxxxx higher demand xxx solar power xxxxx installation xxxx xxxxxxxxxx into xxxx business and xxxx prices for xxxxxxxxxxxx services xxxxx xxx price xx set to xxxxx her input xxxxx will xxxx xxxxxxxx leading xx greater profits xx future We xxx show xxxx xx a xxxxxx supply figure xxxxx demand curve xxxxxx up xx xxxxx price xx installation services xx assume that xxxxxx of xxxxx xxxxxxxx does xxx keep step xxxx rise in xxxxxx It xxxx xxxxx sense xx borrow money xxx this venture xx the xxxxxxxxxx xx giving xxxxxxxxx to firms xxxxxxxx in encouraging xxxxx energy x xxxxxxx implies xxxx she will xx able to xxx loans xx xxxxxxxx lower xxxxx compared to xxxxx business ventures xxxxxxxxxx www xxxxxxx xxxxxxxxxxx CINTRODUCTION:Edgar xxxxx to review xxx business of xxxxxxx a xxx xxx station xx must consider xxx costs of xxxxxxxxx it xxx xxx possible xxxxxxxx he can xxxxxx This will xxxx to xxxxxx xx profits xxxxxxxx A positive xxxxxxxx profit will xxxxx a xxxxxx xx to xxx new venture xxxxxxxx INFORMATION:The article xxxxx us xxx xxx prices xxx expected to xxxxx a high xxxx It xxxx xxxxxx that xxxx high price xxx forced consumers xx squeeze xxxxxxx xxxxxxxx and xxxx cut back xx gas consumption xxx the xxxx xx the xxxx is beginning xx push drivers xxx the xxxxxxx xx we xxxx rising prices xxx declining consumption xxxx means xxxxx xxxxxxxxxxxx by xxxxxxxxx that implies xxxxx revenues for xxx station xxxxxx xxx article xxxx mentions irregular xxxxxxxx that can xxxx