...ECON545 Week 1 Suggested Answers to Questions and Problems NOTE: Please pay particular attention to the way that answers are stated, because these are the kinds of statements that will be looked for in the quizzes and final exam. In general, all answers need to be supported with appropriate reasoning. CHAPTER 3 Chapter 3 Question 8 8. See the figure above. A change in demand is a shift in the entire demand curve and is caused by a change in one or more of the determinants. In contrast, a change in quantity demanded is a movement along an existing demand curve caused by a change in price. This distinction is important. Say, for example, you want to distinguish between rising sales at existing prices due to an expanded advertising program, on the one hand, and rising sales due to a sale or a reduction in price, on the other hand. A change in supply shifts the curve and is caused by a change in one or more of the determinants. A change in quantity supplied is caused by a change in price. Chapter 3 Question 11 11a. You would probably increase the prices of existing inventory of surfboards. You would be expecting a shortage in the short run, and wholesale prices of foam blanks would probably rise in the future. In fact, most retail outlets increased the price of their boards from $100 to $300. 11b. First, in the very near term, surfboard prices will rise, and the stock of polyurethane boards will fall. Over time, other companies will supply alter-native blanks that use alternative...
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...Business Economics GM545 Fall 2013 Chapter 15, Question 14 There are always limitations in anything that we do just as there are also limits of the national income accounts and how it reflects our standard of living. National income is measured in three ways, which include the value of expenditures, the value of inputs used in production, and the sum of value added at each level of production (Ott). The most widely used measurement of national income is gross domestic product (GDP). GDP is a measure of the economy’s total output and is equal to the total market value of all final goods and services produced by resources in the United States (Stone 411). The limitations of the national income when measuring our standard of living include errors in measurement (GDP) and categories that are not measured. GDP only measures the absolute value of goods and services. For this reason, there is a limitation because the values of goods used to produce a product are not measured. This prevents “double counting”, since the value of the products used to produce a product are already calculated. GDP is a measure of the amount only produced by resources in the United States (Stone 412). So if a product is made outside of the U.S. by an American manufacturer it is not calculated into GDP. NIPA (National Income and Products Account) uses the prices paid for products to calculate GDP. So even if a company loses profits when selling a product that is what factors into GDP, not the production...
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...Project Paper 1 Submitted by: Walter Siecinski wjsiecinski@gmail.com ECON545: Business Economics Instructor: Francisco De Cossio July 21, 2013 I. Exercise 1 New Jersey gas prices have been rising recently during the summer months. New Jersey residents frequent the Jersey Shore towns starting sometime in May till almost October during the year. The most visited times are July and August. Usually sometime during those months, gas prices will fluctuate the most. Currently, gas prices have risen about 18 cents. Prices could have gone up more, however New Jersey’s gas tax has kept it from going even higher (AP, 2013). Gas prices can go up in NJ during the summer months due to the high demand for gasoline during that time. You can usually find the Garden State Parkway flooded with motorists on Fridays in the summer months of residents going down the shore for the weekend. Saturday mornings can have the same issue because of residents going down the shore for the day. The amount of cars on the road means more gas is needed meaning demand will rise. There is also a supply issue with gasoline. Unrest in the Middle East, where many of the barrels of crude oil where our gasoline comes from, causes supply to change frequently. Currently it is causing the supply to go down. Reducing the gasoline supply will also cause price to increase as demand for gasoline still exists and consumers still need gasoline to drive. This will cause gas...
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...Business Economics Microeconomic Issue 1. Everyone’s Gasoline Problem: We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? There are many factors that go into the price of gasoline. A quick and easy breakdown of what makes up the gasoline price (Shipp,2010) is the cost of crude oil is about 50-70%, Federal and state taxes about 19-25%, reefing costs and profits about 20%, and distribution and marketing costs about 10-12%. (Rex, 2010) Another factor is the clean air act in metro areas due to the congestion so prices in these areas are a bit more as refineries are forced to upgrade their operations to sell a blend that includes ingredients to support cleaner fuel as required. Natural disasters do not help like hurricane Katrina ripped through the Gulf of Mexico and the southern states wiping out refineries and drilling operations making it fewer outfits for gasoline and with the demand remaining constant gas prices soared during that time. I have noticed that during the summer time gasoline prices rises nearly due to the demand increasing around 5% due to more people traveling on vacations (increase in demand). (Forbes, 2012) Raw material price is a major contributing factor to increasing of gas prices as (Oil Producing and Exporting Countries) OPEC sets the price for the crude oil making domestic oil suppliers keep less inventories so the refineries are not ready and are in short...
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...NATELLA SARGSYAN ECON545 MICROECONOMIC ANALYSIS Instructor: William Mapp Introduction Jenny, my niece, has asked me for an advice about a carrier choice that she is trying to make. Jenny wants to become a dentist. We discussed the topic of high tuition and hard work required on the way of achieving the degree. Jenny knows that I am taking a course in Business Economics and is waiting to my research based advice on whether to become a dentist or not. She also wants to know my opinion on the best location to practice it in the USA. Dental Market Demand. On the market of dental services two sides can be identified; they are the patients who represent the demand side and the dentists who are on the supply side. The suppliers-dentists- provide treatment for their patients in exchange of certain payments. These payments are to cover operating costs such as dental supplies and equipment, staff salary, marketing, space rental and so on. The patients who are in need of those services are concerned about the financial expenditures to receive it. There are two ways to pay for the services from the patients’ side: to purchase a dental insurance or to pay for the treatment. Most of the dental insurances are provided by employers. Some of the plans cover the treatment for 100% other plans cover a portion of the treatment leaving the other portion for the patients to pay. The demand theory states that services or goods are the objects of taste and preference of people. Individuals...
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...Business Economics GM545 Spring 2011 Everyone’s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Research the recent history of gasoline pricing in your area, and attempt to relate any fluctuations you observe to documented supply and demand factors, as outlined in our book. By the end of the 6-week period of November 19th –December 31, gas prices in Chicago had risen significantly. In it’s bi-monthly newsletter at the beginning of January 2011, the Lundberg Survey, a report which tracks gas prices, points to Chicago for the highest gasoline prices nationally topping the charts at an average of $3.35 per gallon for regular. With Illinois already high, 58.8 cent gas tax coupled with the city of Chicago’s gas tax of 50 cent a gallon any nationwide increase in gas prices will be even more significant in Chicago (1). Gas prices vary widely from state to state based largely on local taxes placed on the inelastic product. But prices have been trending higher nationwide after an increase in the price of crude oil, the main ingredient in gasoline (2). In Chicago, just as in the rest of the U.S., there was an increase in demand for oil during the period of November 19th –December 31, 2010. This increase in demand is illustrated by the decrease in U.S. crude oil inventories. Between the mentioned period of 6 weeks, crude oil inventories declined by 21.84 million barrels (3). These declines were a result of increases in gas...
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...Nonlapan Burimsittichai Ungkana Lukkanavej Econ545: Project 1 – Microeconomic Analysis January, 26, 2015 Introduction In the previous years we have been experiencing a shortage on the supply of physicians, issue that according to the projections will not be changing any time soon. Given this situation we could probably already answer the question and risk to say that it is a good idea economy-wise to become a doctor, seeing that at least for the next 10 years the supply will not be anywhere close to satisfy the demand. There’s many factors that affect this increase in demand such as aging of population, the Baby Boomers that want to remain active and look for and use more healthcare as well as the next generations after them. It is also important to mention that an increase on productivity of healthcare could reduce the gap between demand of supply, but after many years and different attempts almost nothing has been achieved, since healthcare has become more and more complex. Here is a little extract from AAMC website talking about the issue of physicians shortage of supply: The number of federally funded residency training positions was capped by Congress in 1997 by the Balanced Budget Act. The 26,000 residency positions available for first year trainees will not be enough to provide training for the students graduating from medical school as early as 2016. In addition, Medicare support of graduate medical education (GME) includes paying its share of the costs...
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...Baker Business Michele Economics GM 545 Summer A 2009 Project 1 Email: michelebaker26@yahoo.com 1 Gasoline Prices Supply and demand have played a large part in the increase of gasoline prices the nation has experienced lately. The Law of Demand clearly indicates that the rise in demand for gasoline will lead to an increase in prices. This has been a topic that seems to continue coming up in conversations both in the classroom as well as everyday interaction as it seems to be affecting everyone. Some cannot afford to put gas in their SUVs anymore because the prices have been fluctuating and continuously increasing over the last couple of years. Even though I have read several research studies and articles on this before, I found a very interesting point that I had not previously heard of or thought about. I have often wondered what we as Americans can do to reduce demand of gasoline, since the increase in demand has obviously led to the rise in petroleum prices. However, this study shows that the problems may be stemming from the increase usage in both China and India to power their cars and factories. Unfortunately, there is nothing we can do to reduce the demand that other countries are creating. The article suggests that really the only thing that Americans can do is to decrease their personal demand for the fuel by getting rid of the gas guzzling SUVs or turning to alternative sources of transportation. Here in Arizona one of the skeptics of the gasoline price hike was...
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...ECON545- Week 6 You Decide Transcript The current rate is at 8 % and is expected to rise further, the inflation rate is -2.4 overall and prices are falling. After consulting with my financial colleagues on how to proceed with the state of our economy, I agree with Raymond Burke, the President does have some control over the fiscal policy but monetary policy is executed by the Federal Reserve Bank. I agree it would be beneficial to lower interest rates which will boost the economy and help individuals get back on their feet. Patricia Lopez suggests the Federal Policy should leave interest rates alone, but should sell bonds and raise bank reserve requirements but I disagree with her because the Federal Reserve normally do not recommend selling bonds and if they do, usually it is not due to monetary policy. I do agree with Allison Tanney which is Congress and the President should work together to lower taxes which will likely stimulate growth and produce sales in the economy. I also disagree with Kathy Lee on recommendations to raise taxes and reduce government spending. Decreasing taxes and increasing government spending will create new jobs opportunities as the government’s consumption of goods and services from our construction industry increases. This will lead to consumer’s confidence, real GDP and marginal profits in the economy. My final recommendation to the President; by lowering rates will encourage consumers to become involved in spending and re-investing in our nation’s...
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...Project 1 – Microeconomic Analysis Donald Cole ECON545 – Business Economics Date: September 18, 2014 Situation C The situation that I personally thought would correspond with today economy would be situation C. Situation C basically states that Edgar has a business idea of buying two gas stations for profit situations. Edgar is asking for advice on buying these two gas stations before taking action on his business idea. Hopefully, by the end of this documentation, I would give Edgar enough information to decide on what to accomplish on his business idea. My research is going to consist of the demand and supply of gasoline. It’s going to consist of the comparison between the prices in the different countries and possible states. I will also have graphs to show all the different factors that would help Edgar situation on his business idea. The first situation that I see is that you’re buying two gas stations that don’t have a start of plan like a name for the gas station. You also don’t have a general location to put the two gas stations. Do you even know what type of gasoline are you planning on selling to the customers? Those are some things that need to go into a detail plan before you just jump right out in the midst of buying a gas station. Let’s start with the basic information of a particular name for the company. Some of the popular gas stations that is used in the United States are BP, Citgo, Chevron, Marathon, Phillips 66, and more (Gas Stations...
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...BUSINESS ECONOMICS ECON545 JULY 2013 SESSION CHAPTER 15 QUESTION 14. Everyone’s Gas Problem When we discuss fluctuating gas prices, we have multiple reasons why this may occur. To begin, the price of gas could rise and fall due to breaks in the distribution. An example of the breaks in distribution could be a hurricane in areas of supply or an up rise or political upheaval in an area like Libya. Second, we can look at how close you are to a particular area of the US that would be near oil production or proximity. Third would be competition. How many stations are supplying gas in a certain area or region? As we get closer to a city like Chicago, prices may increase because of higher taxes. “According to the EIA, every time you pay for a gallon of gas, you are not only paying for the price of crude oil (61% of cost), but also federal and state taxes (15%), refining costs and profits (15%) and distribution and marketing (10%).” This is a classic case of supply and demand in economics which relates to the chapters we have discussed. Upon reading about gas and crude oil, I have learned that there are different types of oil. Light/ sweet oil is in high demand because it takes less time to refine into gas which in turn results in faster production. The price of light oil is higher because the supply is low. Heavier/ sour crude oil takes less production and is more readily available in turn the price is low. “Chicago, like most big cities, is required by the federal Environmental...
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...Course Project – Part 1 By: Erik Gomez Econ545 11/7/13 Professor: LILIANA N. FARGO PH.D. Ejgomez4@gmail.com Everyone’s Gas Problem Gas prices fluctuate in the U.S. every year and the current national average is around $3.67 yet in Chicago the average gas price is $4.10 (press). What causes gasoline’s prices to fluctuate? And why are Chicago’s gas prices one of the highest in the nation? One of the culprits is supply and demand. OPEC (Oil Producing and Exporting Counties) governs 81 % of the world’s oil reserves and can easily influence the price of crude oil by either increasing or decreasing the production(OPEC). Since gasoline is relatively inelastic, consumer will still need to purchase it even at a higher price. Taxes also influence the ultimate price of gasoline as it tends to distort the price. Chicago’s taxes fluctuate between 70 to 90 cents per gallon in comparison to the rest of the state, which averages around 40 cents a gallon. The cause of higher taxes involves the city spending habits. For example, Millennium Park cost the taxpayers $270 million. World events, to my surprise, have a significant impact in the fluctuation of oil prices. War, national disasters, hurricanes and floods all play a factor in the ultimate price of gas. When BP had their rig explode in 2010 it created a ripple effect around the world causing and increase in demand from other sources driving up the price of crude oil effectively increasing gas prices. These events create a downward...
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...ECON545 Quiz 2 Guidelines Recall that Keller courses are built around Terminal Course Objectives (TCOs). At the conclusion of the course, you will even be asked to rate the extent to which the TCOs have been covered. There are 9 TCOs specified for GM545. Review the TCOs by clicking on Course Syllabus at the top of the course home page, and then clicking on the Terminal Course Objectives link. Also, please note that the TCO(s) to be covered during any given week are specified in the Objective section for that course week. Quiz 2 addresses material covered in Weeks 4 and 5 of the course. The TCOs at issue are: Course Objective Description E Given an introduction to key macroeconomic variables, distinguish between real and nominal output variables, between various inflation measures, and demonstrate the derivation of the unemployment rate; assess the sensitivity of strategic policy decisions based on these measures to the quality of available statistical data. F Given increasing interdependencies between trading nations and the analogy of foreign currency as a commodity, analyze the effects of demand and supply pressures on exchange rates; students must demonstrate an understanding of trade barriers in general, as well as the effectiveness of institutional entities (e.g., GATT, NAFTA, and EU). You will note that the problems that have been assigned from the book focus on these TCOs. The problems address the basics while Discussions topics focus on applications...
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...Rick Auto Parts Expansion ECON545 Expansion Rick is interested in expanding his auto parts company to include many other potential customers. Rick would like to receive an informed opinion from someone who has had education on economical topics such as business cycles, unemployment, inflation, monetary policy, etc. before he commits to this endeavor. All of these topics and statistics will be taken into consideration and once informed Rick will make his decision accordingly. Business cycles A business cycle can be defined as “The fluctuations in economic activity that an economy experiences over a period of time” (Investopedia, n.d.). On average different business cycles have lasted around 69 months with expansion this period lasting 58 months and contraction 11 (Investopedia, n.d.). Of the various cycles the early expansion stage is the one most suitable for starting and or expanding a business. During this stage there is documented evidence that businesses in fields such as technology, entertainment, and services experience an increased profit margin. During the contraction phase, which includes severities such as recessions, only services such as healthcare flourish (Investopedia, n.d.). GDP is an important concept to consider when expanding a business. It measures consumption and production amounts within a specific country within a given timeframe (Investopedia, n.d.). Although there are critics of this method who argue that not all transactions are reported...
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...ECON545 Final Exam Study Guide The final exam will be an online open-book, open-notes, open-computer exam with a time limit of 3-1/2 hours. It will be worth 30% of the course grade. Your final course grades must come from Keller (not me). The final exam will consist of 9 essay questions (6@ 30 points each; 3 @40 points each), each having multiple parts. There are calculations to be performed, but they are straight forward arithmetic operations for which a calculator should not be needed. As with the quizzes, I believe that the final exam should focus on basic economic principles and models, and I have structured the exam in that way. Also, I have made sure to ask questions that reinforce all of the GM545 TCOs. A good way to prepare is to review the assigned chapters from the text, the Key Questions that were assigned from the text, and the two quizzes. There is quite a bit of material to cover. So, in the interest of helping you focus your study somewhat, why don’t I tell you what is the subject matter of each of the nine questions? 1. Demand and Supply (TCO A) Know what the law of supply and demand is all about and be able to predict the impact on equilibrium price and/or quantity when supply and/or demand factors change. The interpretation of some basic graphs will be required. 2. Elasticity and Marginal Revenue (TCO B) The label on this question suggests what you need to know. You need to be able to calculate price elasticity of demand and/or...
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