Econ 545: Microeconomic Analysis
Microeconomic Analysis – Situation C
Econ 545
Introduction Edgar is an investor who sees the high gas prices as a chance to make money from American consumers and their constant demand of gasoline, and soon a large demand from increasing car sales in India and China. Over the past several years the increase in crude oil price resulted in a drastic increase in gasoline prices setting record highs every summer. Consumers had to change their way of living, and savvy investors saw this as an opportunity to get in on making a profit, and this is what Edgar plans to do with the two gas stations he wants to purchase. This investment can easily become a nightmare if the gas stations do not produce enough revenue to cover expenses such as paying back the loans needed for the initial purchase, or increasing maintenance costs. But recently crude oil prices have plummeted and this new development can be a prelude to decreasing profits from gas stations. The analysis provided below will discuss …show more content…
As the world population continues to increase in wealth and ability to purchase a car, the demand for gasoline will rise and the supply must keep up. The interface between the suppliers of gasoline and the consumer is the gas station with daily changing prices for a gallon of gasoline. The variance of prices will either drive consumers away or bring them in, especially during peak travel seasons like summer and winter. The technological advancements of fuel efficient vehicles are a major competitor against gasoline, and with the specific engines becoming more popular ever year, the dependency on gasoline might weaken over the next few decades. Still, as for the present time gas stations are a necessity and with the current drop in gas prices the opening of two gas stations should have a stable flow of consumers leading to some profits after initial start-up
Econ 545
Introduction Edgar is an investor who sees the high gas prices as a chance to make money from American consumers and their constant demand of gasoline, and soon a large demand from increasing car sales in India and China. Over the past several years the increase in crude oil price resulted in a drastic increase in gasoline prices setting record highs every summer. Consumers had to change their way of living, and savvy investors saw this as an opportunity to get in on making a profit, and this is what Edgar plans to do with the two gas stations he wants to purchase. This investment can easily become a nightmare if the gas stations do not produce enough revenue to cover expenses such as paying back the loans needed for the initial purchase, or increasing maintenance costs. But recently crude oil prices have plummeted and this new development can be a prelude to decreasing profits from gas stations. The analysis provided below will discuss …show more content…
As the world population continues to increase in wealth and ability to purchase a car, the demand for gasoline will rise and the supply must keep up. The interface between the suppliers of gasoline and the consumer is the gas station with daily changing prices for a gallon of gasoline. The variance of prices will either drive consumers away or bring them in, especially during peak travel seasons like summer and winter. The technological advancements of fuel efficient vehicles are a major competitor against gasoline, and with the specific engines becoming more popular ever year, the dependency on gasoline might weaken over the next few decades. Still, as for the present time gas stations are a necessity and with the current drop in gas prices the opening of two gas stations should have a stable flow of consumers leading to some profits after initial start-up