ECON545 Paper Project 1

 

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 (150 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 (2 points each) and research (1 point 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. (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.
c. (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.
2. Supply Determinants:
a. Each individual determinant analyzed for your situation, with examples applicable to your situation (2 points each) and research (1 point 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. (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.
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. (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.
c. (5 points) Graph your supply situation using the numbers from your earlier cost of production analysis.
3. Recommendations—(40 points) what are your recommendations explained by your analysis?
4. Paper presentation—(10 points) 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.

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.

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.

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.

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.

Grading Rubric

Section Points earned Points Description
Paper Presentation
10 Good format, citations, lack of spelling errors, etc.
Correct Title page and Reference pages
Relevant Data: Demand: 30 points

Supply: 50 points
80
Demand Determinants and Research Data (15 points)
Price Elasticity of Demand (10 points)
Graph of Demand (5 points)

Supply Determinants and Research Data (15 points + Profit Max/Cost of Production Analysis = 20 points for total of 35 points)
Price Elasticity of Supply (10 points)
Supply graph (5 points)
Recommendations 40
What are your recommendations explained by your analysis?
Total 130 A quality paper meets or exceeds these requirements
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