Macroeconomic: Economics and Gas Oil

Topics: Economics, Monetary policy, Supply and demand Pages: 8 (1207 words) Published: May 10, 2014

Russ Graziano
ECON 545
Keller Graduate School of Management
April 13, 2014

The idea Edgar has for opening up four new gas stations is based on a well based argument making it viable as a profitable business venture. The evaluation on the American consumer to accept the high price for gas oil prices forms the first approach towards establishing a business. Gasoil businesses in the world run as cartel where it supply and prices are determined by the few stakeholders in the industry. The stakeholders form an agreement among their competitors on the price, making and, marketing of the product (Fredy, 2010). The cartel though the production affects the GDP growth rate. Gross domestic product represents the monetary value of the goods produced in the country within a year. The enterprise runs as an oligopoly. An oligopoly represents a business type where there are few sellers in the market. The few sellers are due to the restriction imposed on entry to a monopoly. The production rights are restricted by the producer and the producer also controls the prices of the commodity (Brake, 2011). Unemployment will be apparent as the restriction holds down people with the relevant skills to join in the trade. Price control is done through price fixing and determining the market share. The market shares will go a long way to influencing international trade. International trade represents trade past the nation boundaries (Derik, 2010) . The main purpose of a cartel is profit increment to the individual by reducing competition. Edgar by starting up the gas oil business will gain profit margin from the monopoly. The government is also be involved in the control of the production rights of such a cartel. It is through fiscal policies that the government will regulate such ventures with an aim to protect the public from exploitation. Fiscal policies tools are the government imposition on tax and revenue collections (Tayor, 2007). The focus on the convenience good and assumption it will make a profit in the society is the reason Edgar insists on the production. Convenience goods are those that are distributed widely and are inexpensive and the gas oil forms one of them (Fredy, 2010). Macroeconomic covers the demographic aspect, as these goods are made available to the population. Demography represents human residents statically (Henry, 2008). Startup capital is a needed by Edgar as he plans to buy the four gas oil station. The fund borrowed from a financial institution will be affected by the interest rate and the financial policies. The monetary policy is a tool used to control the supply of money in the society through affecting the interest rate in the society (Tayor, 2007).The estimates of sales to increase in china and India represents the trade cycles. Business cycles are periodic change in the production and affect the Gross Domestic Product of a country. They cause the GDP to fluctuate and thus an expansion and contraction of the level of economic activities in the country (Tayor, 2007). The business sets itself on time of favorable economic benefits as the bank rates are favoring a business positively. Edgar requires a large capital base to start a business and borrowing from a business organization is paramount. Interest is payable on the loan capital that is taking from such institutions. With a low lending rate, the business organizations enable economic growth as a society can borrow a large sum of money for the investment project. Investment improves the living standard of the society as they earn a profit from the investments. The advice to Edgar is to take up the positive strengthening economy and invest during the low lending rate (Sydney, 2010). Demand is as the amount of a commodity that consumers are willing and can purchase at any given price over a given time (Tayor, 2007). The law states that, at low prices, the need is high. The firm...
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