I’m studying for my Economics class and need an explanation.

7/9/19 Step 1 the Skills Gap analysis can be a useful tool in both the short run and the longer run. Keep it handy to track your own progress. And, honest and thoughtful self-assessment will assist you in forming your career development.

Steps 2 (supply and demand) and 3 (Profit maximization): please complete step 2 and resubmit in a single excel file along with step 3. You will need to take another look at Step 3. The elasticity computations are all incorrect. Use excel to perform the computations rather than simply typing in numbers. For Q6 the computations for MR and MC need to be more precise (4 decimal points). There will be a precise price where MR is exactly equal to MC.

Elaborate on your answers. Getting the numbers correct is the first task. Explaining them is how you can add value to your work (i.e. the EP versus MP difference). In Step 3, for example, Q7 is a good place to elaborate. Why is profit maximized when MR = MC? Would that concept work in real practice at this station? Can the station manage pricing such that MR will equal MC? How might competition interrupt the goal to match MR and MC? I.e., just getting the correct answers to these steps is what is required for MP.

7/17/19 Revised Step 2 (demand and supply): Submit only one spreadsheet with all tabs completed.

Q1: the answer can be read from the graph. So, your computation is off a bit. Wonder why? Can you figure out the discrepancy?

Q2: similar error. Look at the intersection on the graph. That price and quantify is the equilibrium price and quantity.

For both Q1 and Q2, additional commentary is in order. What might cause a shift in demand? Shifts in demand are due to factors other than price.

Response to Q3 is limited.

Step 3: Q1: the computation of percentage change in quantify and price is incorrect. The denominator should be the average that was computed not the amount on line 25.

The revenue change is incorrectly computed. Use the revenue amounts in cells N37 and N38.

Q2: has the same errors in computing the % change in quantify and price.

Q3: same error as Q2.

Q6: The prices used to compute revenue for 4,001, 4,401, 4,801, and 5,201 are incorrectly computed. Look at how the price was computed in cell M102 and apply the same rationale to the prices for the other volumes. The price change is not 1/400th its 1400th of .01.

These steps need more work before the project can be completed.

Step 5: The Executive Summary will need to be revise. Both steps should be incorporated into the reports; use data from the study to support comments and recommendations. Tables and charts are an efficient tool to present data and improve the visual appeal of your summary. Data drives decisions, so support comments with data.

7/25/19 Second Revision to Steps 2 (supply and demand) and 3 Profit maximization): Step 2: Q1: Read the numbers on the graph for the solution. Your math computation is not correct. Since you know the solution from reading the graph you would work at the math with that solution in mind. The math is not needed for this question. However, discussion explaining the ideal of price and quantity equilibrium is appropriate.

Q2: Again, the graph exhibits the correct price and quantify equilibrium. In addition, there is a shift in demand resulting in a new price and quantity equilibrium. Shifts in demand are due to factors other than price. What might such a factor be that leads to a shift in demand?

Q3: What would cause a surplus in oil to become zero? OPEC certainly could choose to reduce production, but wouldn’t other oil producers take up the slack?

Your responses to these questions appears as though you are addressing an earlier version of this step. Steps change regularly. So will the solutions.

Step 3 (profit maximization): Q1: computation of elasticity is not 32.216. You have the percentage change in quantify correct but the % change in price is incorrect. The prices are not 2.75 and 2.76, they are 2.749 and 2.759. The precision matters. So the average is not 2.7545 but rather 2.754. Small difference but it will result in a slightly different number for elasticity.

Q2 and Q3 are fine. Good job.

Step 5: Executive Summary: The background for Exxon – earnings and cash flow – is not relevant to this work. The information on different pricing strategies is of interest. The report must focus on the work in Steps 2 and 3. The report should communicate the findings of that work – so you must incorporate the data from Steps 2 and 3. Otherwise, what would be the purpose of the work?

You need to revise Step 2, small correction to Step 3, and revise the ES to report on the results of the work in Steps 2 and 3. Include explanations of equilibrium price and quantify, price elasticity of demand at the local station, and recommended price at which marginal revenue equals marginal cost. Recommendation should be limited to the work performed in Steps 2 and 3. References should be cited to the extent they are related to the work in steps 2 and 3.

7/30/19 Third Revised Steps 2 (supply and demand) and 3 (profit maximization):

Step 2 (supply and demand): Q1 the equilibrium price and quantity are correct. Q2: The equilibrium price and quantify are incorrect. You did not looked at the graph to seen the shift in demand. What might cause a “shift” in demand as opposed to a change in demand?

Q3: The question does not pertain to the economic model that describes the oil industry.

Step 3 (profit maximization): Most of the numbers are correct. It does not appear that you are taking the time to review the feedback to improve your work.

Step 5(Executive summary): The purposes of the report are outside the scope of the work completed in steps 2 and 3 as well as the discussion in Step 4. The “mechanisms for reducing costs”, and suggestions for improving revenue were topics covered in earlier versions of this project. The project change over time so you cannot rely on previous work to complete this semester’s projects. Methods: there were no financial statement used as primary material in this project.

Your summary does not address equilibrium prices and quantities nor does it address elasticity per step 3. Use the data from steps 2 and 3.

One more opportunity to revise this project. First, correct response to Q2 in Step 2. Second, correct computation of elasticity per question 2 in Step 3 (see previous feedback). Third, revise the Executive Summary to incorporate the data from both steps 2 and 3 and confine the focus of the report to the content of Steps 2 and 3 and the discussion in Step 4. Do not rely of previous versions of this project to complete Steps 2, 3, 4 or 5.



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