Business Proposal Eco 561

Topics: Economics, Costs, Marginal cost Pages: 5 (1740 words) Published: August 26, 2012
Business Proposal
Timothy Anderson
ECO 561
Daniel Rowe
July 16, 2012

Business Proposal
A current issue with home health care and senior citizens is the need for medicine and food. In the current state of the economy with the rise and gas prices and the need of people to still commute, people have to figure out ways to get to and from pharmacies and grocery stores. In the economy two markets that will not fail in recession are discount retail food and medicine because people need both to survive (Viswanathan, 2009). According to AAA (2012), the national average for gas is currently $3.39 per gallon. The cost of gas coupled with the cost of prescriptions and groceries create a huge issue in elderly, disabled, and unfortunate citizens finding ways to get to and from businesses that produce and sell these products. A business service to combat the issue is a delivery service for the less fortunate citizens. In and Out Delivery Service

The business is will deliver custom grocery and prescription orders to customers. The customer goes online and fills out the order at least three days in advance. The consumers can enjoy a complete shopping experience from the comfort of their own home. It gives the user freedom and time from acquiring rides and spending huge amounts of time shopping. The service creates more freedom and control over the daily activities of each consumer while helping boost the economy. The problem and need for the delivery service comes from high costs in gas causing boosts in fees for public transportation and even cab services. Consumers know that owning cars are a little bit costly with fixed costs from insurance and monthly payments. The variable costs of vehicles come with gas consumption, vehicle maintenance, and repairs. The name of the delivery service is In and Out Delivery.

Elasticity and Demand
Elasticity of demand tells if a product will sell less or more if the price changes in either direction. The elasticity of In and Out Delivery is extremely elastic. People understand the need for delivery to and from the less fortunate. Extreme pricing can lead to a decrease in demand because there are other means of transportation. A decrease in pricing and promotions may help boost the demand. Inelastic goods such as toothpaste, toilet paper, and dishwashing liquid show different factors than elastic goods like computers. Increasing Revenue

In business a simple way to increase revenue is to cut costs (McConnell, 2009). The initial entry into the market will give the business a monopolistic standpoint. The business will be the only company in the market and with 100% market share in the economy, reaching the consumer will be simple. Advertising over the Internet and in-store will help boost reach to the consumer. Partnering with companies such as Wal-Mart and Meijer to advertise will help boost their company sales and create a bigger market for each company. Profit-Maximizing Quantity

The company will use the marginal revenue and marginal costs approach to find the profit-maximizing quantity. Considering the company makes money from each potential run but variable costs change because of each run, the company must pay attention to marginal costs and how much the company can make from each additional delivery. According to McConnell (2009), if the marginal costs are equal to or lower than the marginal revenue the company should pursue production. In this case the company should proceed with the delivery. The extra delivery raises awareness in the community and adds to visibility in the market leading to more advertising and consumer business. The company must understand that each situation is specific to each consumer but a base price will help understand the marginal revenue and give a better understanding to the company on marginal costs and the profit-maximizing quantity. Strategies for Pricing and Non-Pricing

The current state of the economy is expansion stage of the business cycle....
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