Q. 4. Determine and discuss the impact of diesel prices on fuel revenues and the impact of gasoline prices on fuel revenues. What is the relationship between meal prices and meals? Define, measure, and discuss the price elasticities. HINT: Find price elasticity of demand by multiplying the slope of the regression line from Excel by the mean real price then divide by the mean quantity demanded. GARY'S GRUB AND GASOLINE"Gloria, we have been operating this service station and diner for many years. Lately, Ihave the feeling that my income has declined. I think that there are opportunities outthere that I have not taken advantage of. I want to pass this business on to my sons andam not comfortable with our current position and strategy."The words above, spoken to Gloria, the primary accountant for Gary's, reveal a number ofconcerns Gary has concerning his operation. Gary's Grub and Gasoline (Gary's) is anindependently owned service station and restaurant on a major interstate highway. Gary hasbeen in operation for over a decade and customers have liked to frequent his business. Oftenthey choose their routes to stop at places like his with low fuel prices and to enjoy food like thejuicy burgers and good food Gary's provides. He has a great reputation with his customers,especially truckers, and enjoys their business. Gary has noticed, however, that when busiestwith truckers, fewer families stop by.Gary has made a pretty good living running the place. However, even though his incomecontinues to seem satisfactory, it does not sewell as the maturity of his sons, George and Gary Jr., has heightened Gary's concern over thefuture of his operation. Gary wants to know what he can do to make this a more profitablebusiness and pass on a more effective operation to his sons. Gary knows that his operationattracts many commercial truckers. However, he is also popular with families stopping to usethe facilities and eating in the restaurant after filling up the family vehicle on vacations.toas much as before. This perception, asOver the past decade Gary's typical markup on diesel is about 1 cent and on gasoline is about1.5 cents. This fuel pricing follows the typical process in this business of taking the deliveryprice and marking it up between 1 and 5 cents per gallon. Gary has also noticed an ebb andflow by season – summer and winter being highest and spring and fall being lower. (Winter isDecember, January, February. Summer is June, July and August.)Gary knows that he has some control over fuel prices and can alter the prices of his typicalmeal. The dilemma he faces is to know in what direction he should change them or whether ornot he should modify his pricing practice at all. Also, he does not know what other activities orattractions he could add that might increase his profits. If he raises prices, he knows that hewill reduce sales. At lower prices, he will sell more but incur greater costs.Gary is getting ready to step back from his business and turn the operation over to his sons.Before he does that, he wants to be comfortable in leaving his sons with a well-defined pricingstrategy, based upon data.Following up on the expression of Gary's future concerns, Gloria, his accountant, has gathered asubstantial amount of information regarding his firm's performance over the past decade. Thisdata is available in an Excel file on the course website. Gary'sGary's AverageGary's NumberRestaurant Gary's Restaurant Gary's NumberGary's AverageRetail Gasoline Retail DieselPrices (C/gal) Prices (C/Gal)Gary's FuelRevenueAverageRestaurantGary's PreTaxGary'sReal Gas Gary's RealPurchaseTicketsRevenueof Fuel SalesProfitMonthGary's Rea(Tickets/Month)Date CPIAug-2007 7Sep-2007 I153.202007 153.70Dec-2007 15350Jan-2008 154.40Feb-2008 154.90FApr-2008 I56 30May-2008 T156.60Profit Price Diesel Price44.095.49 78.04 84 453 36,531.49 72.504 35,004.79 A39.999.28 78.267 30,985.52 77.75($/Ticket)(S/Month)(Sales/Month)(S/Month)(S/Month)Number2,580 16,714.839,2238,90312.022-7,608 109,326.96394T1933111.08115,471.96138,797.77136.386,8381,381,473.55,966.2589.0233,802.3692.17120.13 13715120.04 136.18 |123.93 138.65136.06 167.88137.92 172.47138.58 164.8510.1112.3747,841.6444,897.44T0,552 T74,002:48245 118,520.90I14912.82IZ04IZ.471.920,678.88122.22 I55.68135.40 154.63132,574.14155,00.1270,658357.306.48157.809,162123.63124.00130.90T46.67164.89T49.618,8027564T09,672.926,470.08125.548.74T0.469,358.38780.899,86417637.80168305.7153,968.8824.76127.1$7.709,708123.692388,9846,913150.302T05,202.64T08.63128.5810.71TZ6,5585420,657.60TI7.359.62T26.18116.26T04.6IZOT131.6818.1520.86102.89,280114,515.2013.5610.167,1943,805119,132.64133,483.80128.069.078,964173,632.689,6506,4996,7919130136,993.68TH0.38140.04859110,3061474Z156163,556.2255,2871067.678.0069,647.3321,405 1,713,4T44.38148.424.7911.0156,761937.978.4764,867.28143.709,119 127,757.193705 138,005.108,929143.7152.5144.9145.139.5856.75 170.85169.30166.90152.76149.4013.2215.596,993.86148,132.11|167.188 80167,032.26TISZ13,866.76124,654.80144,508.74163.15156.40133012.981369,8376,181.528,482.507,7127,115402184.78150,736.888,498切電丽

In the study of economics, elasticity is used for measuring the changes in quantity demanded of a…

Determine and discuss the impact of diesel prices on fuel revenues and the impact of gasoline prices on fuel revenues. What is the relationship between meal prices and meals? Define, measure, and discuss the price elasticities. HINT: Find price elasticity of demand by multiplying the slope of the regression line from Excel by the mean real price then divide by the mean quantity demanded.

Determine and discuss the impact of diesel prices on fuel revenues and the impact of gasoline prices on fuel revenues. What is the relationship between meal prices and meals? Define, measure, and discuss the price elasticities. HINT: Find price elasticity of demand by multiplying the slope of the regression line from Excel by the mean real price then divide by the mean quantity demanded.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter5: Supply, Demand, And Price: Applications

Section: Chapter Questions

Problem 3WNG

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