Managerial Economics
Key objective: Discovering zero economic profit in a small-business operating in the perfect competition of market structure.
Setting: As a manager and an entrepreneur, you will face a new challenge – business venture structured on the theory of the firm. You are opening a restaurant in your selected town in the State of NY (name it up front in your assignment).
Restaurant name is Soul de Relle
As to simplify the scope of your consideration, we narrow down the problem with several assumptions. You will be serving just a meal in the evening. You also consider a stable level of sales at the full capacity reached; just ignore the slow period of market entry. Make your assessment only per one-month period. Make sure that the targeted level of operations is feasible.
Instruction: You need to apply and discuss relevant economic concepts and tools with supporting data to solve this real-life imitating simulation. Include also a one-page executive summary for the business plan with assumptions and the goal set, based on the market conditions examined by you. Make sure that all parts fit in well and make a comprehensive picture with the compromise on the final concept of the business model adopted.
Outline: Analyze, based on the demand and supply model, the following issues:
- • Number of meals sold and prices charged,
- • Price elasticity of demand and how to address it in your business
- • Total revenue
- • Possible challenges
- • Fixed costs and variable costs and marginal cost
- • Cost of inputs
- • Total cost and unit cost (average total cost)
- • Diminishing marginal product
- • Economies and diseconomies of scale
- • Total profit and profit per unit.
