Microeconomics Analysis for Gasoline Station Project – Statistical Analysis:

Microeconomics Analysis of Investment for two Gasoline Station / Convenience Stores

Situation/Scenario

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.

## Microeconomics Analysis for Gasoline Station Research Paper Instructions

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.

Instructions:

Complete a detailed Microeconomic Analysis Report on the situation above.

The Microeconomic Paper tests your ability to apply economic principles to a business decision. The

completed paper is to be written as a professional report. See the grading rubric at the end of this

document. Be sure to use Peer Reviewed and Scholarly Journals for finding data. Avoid questionable

sources, such as Wikipedia. Note: Wikipedia is Not an acceptable reference for scholarly material. 5

references and 5 pages minimum.

##### Charts and Graphs for Microeconomics Analysis for Gasoline Station

Charts and graphs must be included to represent statistical data. A chart and

graph may not exceed ¼ page in length. Maximum total graphs and charts is four. Use current data, DO

NOT copy and paste from reading. You must use a minimum of two charts/graphs with current

statistical data (Graph the Demand and Graph of Supply).

Other charts and graphs may include but are not limited to: 1. Price Elasticity of Demand, 2.Price

Elasticity of Supply, 3. Relationship between Price Elasticity and Total Revenue, 4. Elastic and

Inelastic Demand, 5. Perfectly elastic and perfectly inelastic supply.

###### Microeconomics Analysis for Gasoline Station List of Specific Required Information

The following is a list of the specific required information, research, graphs, and math to be

included in each section. Microeconomics Analysis for Gasoline Station

The 5 Determinants of Demand are:

1. Availability of close substitutes

2. Passage of time

3. Luxuries versus necessities

4. Definition of the market

5. Share of the good in the consumer’s budget

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. (20 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. (10 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 (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. (40 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 Shut Down and how you will know which it is. Microeconomics Analysis for Gasoline Station

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. (20 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. (10 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.

Microeconomic Paper as a Professional Report

Your paper should be organized into five parts as listed below. 5 pages minimum Microeconomics Analysis for Gasoline Station

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 or scholarly (peer reviewed) articles.

Ask a librarian for help if needed. Use in-text citation to report the source(s) of the data. Microeconomics Analysis for Gasoline Station 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 eight sources alphabetically in APA format.

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: 70 points

Supply: 110 points

180

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 40

What are your recommendations explained by your analysis?

Total 230 Microeconomics Analysis for Gasoline Station

To complete this Project you must read:

1. “$4-a-Gallon Gas Fueling Fears for Recovery” on page 196

2. CHAPTER 6 Elasticity: The Responsiveness of Demand and Supply

Note: Use current statistical data. Do Not copy and paste charts and graphs from readings. Microeconomics Analysis for Gasoline Station