ECON545: Project 1Microeconomic 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. (20 points) Price Elasticity of Demand facing you in your scenario,
including actual calculation of it using the midpoint formula. If you
cant 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.
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 cant 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.

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 emailed 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 Edgars 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 emailed you asking for advice on his 100-acre corn farm. He mentioned how, after
30 years of growing corn, he wishes to leave that commoditys 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 Dans 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 PageName, 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

Paper
Presentation
Relevant Data:
Demand: 70
points
Supply: 110
points

Points
earne
d

Point
s

Description

10

Good format, citations, lack of spelling errors, etc.;

correct Title page and Reference pages

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)

Recommendati
ons
Total

40
230

Supply graph (10 points)

What are your recommendations explained by your
analysis?