Microeconomic Analysis

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. (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.
a.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.

a.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.

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.