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Project 1 Outline
Name _________
I Introduction
A.
Product or service type business chosen: [Scenario B]
B.
Characteristics of the industry: The industry is growing and becoming
increasingly popular as the uses for natural gas become more expensive, and
government programs continue to give incentives for the use of green friendly
technology.
II Demand
Determinants
A. 1.Identify
factors determining demand of this product/service: Availability of
substitutes, passage of time, luxury vs. necessity, the definition of the
market, and income
2.Real or made up demand statistics…a chart showing Q vs.
Price
Year 2015 2016
Quantity 708 4,010
Price 32,000 23,000

B. Discussion
about elasticity:
a. Review
the 5 factors affecting elasticity:
i. Availability
of substitutes: Natural gas, diesel, coal, wind power, and nuclear.
ii. The
definition of the market: The market is very competitive, as it has become
cheaper to produce the product, allowing many companies to enter the field.
iii. Income:
There are various option on this as the market for solar panels has become more
accessible recently with options available for both lump sum and payment
options. Ideally, the higher the income the better security for the company,
however as even the payment method requires a certain level of down payment and
a credit check.
iv. Luxury or
necessity: Solar panels are considered a luxury, while there are many benefits
to having them, there are various other options.
v. Passage
of time: the product is a long term one, as the effects, use, and payments for
the product are usually noticed on a long-term basis.
b. Is
products demanding elastic or inelastic…why?
i. Ed =
[(Q2 –Q1)/[(Q1+Q2)/2]]/[(P2-P1)/[(P1+P2)/2]]
ii. Ed =
[(4010-708)/[(708+4010)/2]]/[(32000-23000)/[(32000+23000)/2]]
iii. [(3302)/[(4718)/2]]/[(-9000)/[(55000)/2]]
iv. [3302/2359]/[-9000/27500]
v. Ed = 1.40
/ -0.33 = -4.24 > Ed > 1 > Demand is elastic
C. Graph a
demand curve based on A2 above
III Supply
Determinants
A. Real or
made up numbers to determine optimum output level[hardest part of this project]
a. Fixed
cost categories and $/month
Rent 2,500
Insurance 100
Taxes 600
Total Fixed Costs $3,200/month

b. Variable
cost categories and $/unit
Inventory 8,000
Raw Material 1000
Supplies 6000
Total Variable Cost $15,000/unit

c. Economy
of scale issues [affecting FC/unit]

d. Diminishing
marginal output [affecting VC/unit]

e. Optimum
Profit Chart
Quantity (Q) in Units Total
Revenue (TR) Total Cost (TC) Profit (TR-TC) Marginal Revenue (MR) Marginal
Cost (MC)
0 $0 $3,200 -$3,200 – –
1 $23,000 $23,000
2 $46,000 $23,000
3 $69,000 $23,000
4 $92,000 $23,000
5 $115,000 $23,000
6 $138,000 $23,000
7 $161,000 $23,000
8 $184,000 $23,000
9 $207,000 $23,000
10 $230,000 $23,000

B. Elasticity
of supply
a. Factors
affecting supply elasticity
b. How YOU
assess elasticity of supply: elastic, inelastic, why
C. Graph of
supply curve[likely this will be made up by you considering both you and your
competitors

IV Recommendations
[as the owner of this business]
A. Recommended
output level
B. Profitability
at this output level
C. What
would be wrong about making/selling one more unit than this output level?

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