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Econ Project 1

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Project Paper 1
Business Economics – GM545
Fall Session

Exercise #1 – Ethical Issues Ethics is a major topic of concern with regards to financial reporting, decision making and company operations in today’s world of business. There are numerous laws and organizations that have been developed in order to establish punishments for unlawful behavior or the intent to commit fraud. People’s ethical standards are tested daily. The question remains, how does ethics have an impact on the subject or theories of economics? A realistic example would be best in utilizing ethics in conjunction with economic theories to exemplify the affect on supply and demand. A commodity that is continuously worrisome to the public is the price of gasoline. First, let’s describe what the determinants of supply and demand are in order to conclude a price that can satisfy the organizations that supply the product and the demand of consumers that are willing and able to afford the product. The determinants of demand in this case consist of income, number of buyers and expectations of future prices and availability (Stone, 2007). Tastes and preferences along with prices of related goods are not significant to this analysis because each company establishes similar gas prices and there are currently no substitute products (Stone, 2007). The determinants of supply consist of production technology (construction of oil rigs), cost of resources (extracting the oil and producing gasoline), expectations and even taxes (Stone, 2007). Knowing the determinants of both the demand and supply assists in setting a fair market price, but it can also be used to the advantage of some organizations to inflate profit margins. For example, currently there is no substitute for gasoline, however there is competition within the oil industry. An ethical business operation would continue to supply oil

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