Math in Economics – Gas, Supply and Demand

Hi James, Hoping you can help again! My next two classes are Economics and Accounting so you will be getting a lot of work! =) You operate a delivery service in your local area, but you are thinking of expanding to another market. You’re concerned that you might need to set different prices in the new market because the cost of gas might be much different.

Identify 10 gas stations in your local area. Record the price per gallon for each gas station. Identify 10 gas stations in the new market area. Record the price per gallon for each gas station. Review the data in the Data for Gasoline Supply and Demand.

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Create an Excel® spreadsheet in which you do the following:

  • Create a supply curve for gasoline using the given data.
  • Create a demand curve for gasoline using the given data.
  • Calculate the average cost of gas in your local area.
  • Calculate the standard deviation.
  • Calculate the average cost of gas in the new market area.
  • Calculate the standard deviation.

Determine whether the average price in your local area are higher or lower than the average price in the new market area. Compare the standard deviations. Which area has more price fluctuation? Create a 700-word proposal in which you include the following:

  • Explain elasticity of supply and demand and how this relates to your pricing decision. Are gasoline prices elastic or inelastic?
  • Determine if your prices for your delivery service will be higher, lower, or the same for the new location based on your analysis of the averages and standard deviations of gasoline prices.
  • Defend the pricing decision including all supporting documentation. Cite a minimum of two scholarly references not including your text. Helpful resources: GasPriceshttps://www.fueleconomy.gov/feg/gasprices/states/ Gas prices, Consumers and the Economy http://www.consumerpsychologist.com/gasoline_price…
 
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