Financial Decision Making _ Project 1

The documents that are needed:
· Supply & Demand Graph
· Profit & Maximization Sheet

** They are both in the same excel spread sheet
Project 1: Applied Economics for Managers
Step 2: Analyze a Supply and Demand Graph
For the first assignment, Frank has given you data to analyze an illustrative supply and demand graph for the production of crude oil in the world. To analyze the graph, you will need to understand demand, supply, and equilibrium economics concepts. The graph is useful to know how prices are set for crude oil on a minute-by-minute basis in world commodity markets.
Frank has passed along some data he has gathered to help you analyze a supply and demand graph for the oil and gas industry. View Frank’s data and read the instructions on the Supply and Demand Graph worksheet of the Project 1 Excel Workbook, which you will access below. You will use different sheets from this workbook in the subsequent steps of this project.
To help you build a basic understanding, you must determine what economic model best describes the oil and gas industry. There are three basic economic models, and none fits the oil and gas industry perfectly. Is this industry in perfect competition? Is it an oligopoly? Or a monopoly? To make this determination, read about perfect competition, oligopoly, and monopoly. You should also read competition production and pricing decisions, monopoly production and pricing decisions, and price discrimination.
The key point in deciding on the economic model is the number of sellers.  If there is only one seller, the industry is likely a monopoly.  On the other hand, if there are five or fewer sellers, the industry is expected to be an oligopoly.  Finally, if there are a dozen or more sellers, the industry is closer to perfect competition.
Here is an illustrated example of a supply and demand graph with the point of equilibrium:

Equilibrium Price of Coffee

When we combine the demand and supply curves for a good in a single graph, the point at which they intersect identifies the equilibrium price and equilibrium quantity. Here, the equilibrium price is $6 per pound. Consumers demand, and suppliers supply, 25 million pounds of coffee per month at this price.
Source: Demand, Supply, and Equilibrium is licensed under CC BY-NC-SA 4.0.
When you have finished this step during Week 1 of the course, post the Project 1 Excel Workbook to the submission folder located in the final step of this project.
When you have completed Step 2, proceed to Step 3, where you will examine costs, pricing, elasticity, and the production function.
Licenses and Attributions

Demand, Supply, and Equilibrium is licensed under CC BY-NC-SA 4.0.

Project 1: Applied Economics for Managers
Step 3: Analyze Cost, Pricing, Elasticity, and the Production Function
In your second week on the job, you’re beginning to realize the responsibilities and complexities of your job, and you’re glad to have analyzed the supply and demand graph you created. As you come into work, you see a voicemail from flashing on your office phone—it’s Frank:
Voicemail from Frank
“Good morning. I just wanted to say you really did a great job developing that supply and demand data. Now that you have some understanding of the industry, I would like you to apply the concepts of elasticity of demand and elasticity of supply. 
“Exxon is concerned about a franchisee store in Fitzhugh, Maryland. The owner is having trouble maintaining profits while managing price changes. They’d like MCS to offer advice on price adjustments for that franchise to achieve maximum profit.
“I’ll provide with data that describes the gas station franchise operations and competition. You can find this data in the Profit Maximization worksheet of the Project 1 Excel Workbook you used in the last assignment (Step 2). Complete the tables in the worksheet and answer the client’s questions.
“The tables in the worksheet show the quantity and price of oil sold by the franchisee. First you will need to calculate the elasticity of supply; the total revenue, total cost and profits at several levels of price and gallons sold (demand). Economists point out that maximum profit is achieved when Marginal Cost equals Marginal Revenue. Hence, you will need to solve for:
· marginal cost (MC)
· total revenue (TR) and marginal revenue (MR)

· profit 
To complete your calculations, it is important for you to understand average total cost, opportunity cost and the profit maximization formula. 
“Please reach out if you have any questions. Thanks so much.”
Access the data and read the instructions within the Profit Maximization worksheet of the Project 1 Excel Workbook to complete this assignment. When you have finished answering the questions, post the workbook to the submission folder located in the final step of this project. Complete this task during Week 1.
Now that you have completed Step 3, proceed to Step 4, where you will discuss world oil price movements.