Create a Supply and Demand Graph

Step 2: Create a Supply and Demand Graph

The first assignment Frank has given you is to develop an industry analysis through a supply and demand graph. In order to develop the graph, you will need to understand demand, supply, and the demand curve and utility. You should also be able to identify the point of equilibrium. The graph will be used to help the client, ExxonMobil, determine where they stand within the oil and gas industry.

Frank has passed along some data he has gathered to help you create a supply and demand graph for the oil and gas industry. This graph will be used as part of a comprehensive analysis to advise the client about optimal production levels. View Frank’s data and read the instructions on the Supply and Demand Graph worksheet of the Project 1 Excel Workbook, which you will access below. You will use different sheets from this workbook in the subsequent steps of this project.

To help ExxonMobil, you must determine what economic model best describes the oil and gas industry. Is this industry in perfect competition? Is it an oligopoly? Or a monopoly? In order to make this determination, read about perfect competition, oligopoly, and monopoly. You should also read competition production and pricing decisions, monopoly production and pricing decisions, and price discrimination.

Here is an illustrated example of a supply and demand graph with the point of equilibrium:

Equilibrium Price of Coffee

When we combine the demand and supply curves for a good in a single graph, the point at which they intersect identifies the equilibrium price and equilibrium quantity. Here, the equilibrium price is $6 per pound. Consumers demand, and suppliers supply, 25 million pounds of coffee per month at this price.

Source: Demand, Supply, and Equilibrium is licensed under CC BY-NC-SA 4.0.

When you have finished this step during Week 2 of the course, post the Project 1 Excel Workbook to the submission folder located in the final step of this project.

When you have completed Step 2, proceed to Step 3, where you will examine costs, pricing, elasticity, and the production function.

Licenses and Attributions

Demand, Supply, and Equilibrium is licensed under CC BY-NC-SA 4.0.

Step 3: Analyze Cost, Pricing, Elasticity, and the Production Function

In your second week on the job, you’re beginning to realize the responsibilities and complexities of your job, and you’re glad to have completed the supply and demand graph you created. As you come into work, you see a voicemail from flashing on your office phone—it’s Frank:

Voicemail from Frank

“Good morning. I just wanted to say you really did a great job developing that supply and demand graph. I would like it if you could deepen your involvement with this client by applying the concepts of elasticity of demand and elasticity of supply  to maximize the ExxonMobil’s profits by solving several cost and revenue functions. These are commonly used in the oil and gas industry and are recognized industry standards.

“Exxon is concerned about a franchisee store in Fitzhugh, Maryland. The owner is having trouble maintaining profits while managing price changes. They’d like MCS to offer advice on price cuts for that franchise and determine the individual station’s profit maximizing price using the production function.

“I’ll provide with data that describes the gas station franchise operations and competition. You can find this data in the Profit Maximization worksheet of the Project 1 Excel Workbook you used in the last assignment (Step 2). Complete the tables in that file and answer the client’s questions about price elasticity of demand, the impact of price cuts on revenue, and the profit maximizing price.

“The embedded tables show the quantity of gallons of oil sold by the franchise as well as the price per gallon. You’ll need to solve for marginal cost (MC), total revenue (TR) and marginal revenue (MR), and profit using the formulas provided in the worksheet. To complete the profit maximization calculations correctly, it is important for you to understand how to calculate average total cost and opportunity cost.

“Finally, I’d like you to calculate the profit maximizing price by using the profit maximization formula. This information will help you determine the appropriate price per gallon of oil to achieve maximum profits for the client.

“Please reach out if you have any questions. Thanks so much.”

Access the data and read the instructions within the Profit Maximization worksheet of the Project 1 Excel Workbook to complete this assignment. When you have finished answering the questions, post the workbook to the submission folder located in the final step of this project. Complete this task during Week 2.

Now that you have completed Step 3, proceed to Step 4, where you will discuss pricing strategies.

Step 4: Discuss Pricing Strategies

The days are passing quickly now. Week 3 starts slow, but an email from Maryland Creative Solutions’ Managing Director, Elisa Izuki, changes the pace.

INBOX (1 NEW EMAIL)

From: Elisa Izuki, Managing Director

To: You and Frank Marinara, MCS Senior Partner Finance

Good afternoon,

I am requesting your attendance at the upcoming senior partner meeting. The primary objective of this meeting is to discuss a new pricing strategy for ExxonMobil. Based on your analysis last week of the oil and gas industry’s economic model, I’d like you to contribute your insights to the project meeting. Looking forward to having a productive and informative working session.

Sincerely,

Elisa

This is a big moment for you, as you are the only employee in the meeting that is not at the executive level. This is your time to shine!

As the meeting approaches, Frank briefs you on the key points of discussion:

· MCS has been tasked by ExxonMobil with identifying a new pricing strategy. You should incorporate the increase in the price of oil and the increase in revenue for ExxonMobil into your strategy, with the viewpoint of maximizing economic efficiency. Assume that your fellow classmates are participants in the MCS project meeting. Use the Pricing Strategies Discussion section in this classroom to discuss pricing strategies for ExxonMobil. Give credit to any sources you use.

· Later in the week, you have a follow-up meeting with the project team to help ExxonMobil reach a point of profit maximization. Respond to your fellow classmates’ original discussion posts and support your statements by crediting any sources you use.

During Week 3, submit one original posting of at least 250 words in the Pricing Strategies Discussion by Saturday and post two responses of at least 50 words each to other discussion participants by Tuesday. See MBA discussion guidelines.

When you have finished Step 4, proceed to Step 5, where you will present your recent findings in an executive summary and PowerPoint presentation.

Step 5: Prepare Executive Summary

Your busy third week on the job isn’t over yet. After a busy morning of ad hoc team meetings, you’re greeted in your office with a phone call from Frank.

Phone Call from Frank

“Hi again. I’ve got news about our client.

“ExxonMobil is looking to increase revenue by 10 percent and possibly reduce costs. I’m going to need an executive summary based on the analysis you’ve done for this client so far and your recommendations for ExxonMobil’s goal of a 10 percent increase in revenue. This executive summary, along with citations for any sources you use, should be about one page long.

“Please also prepare a brief PowerPoint presentation highlighting your analysis and recommendations. The executive summary and PowerPoint presentation should demonstrate your ability to think critically. This is your chance to be recognized for your knowledge in the accounting and finance field.

“Thanks again!”

Post your executive summary in the submission folder located in the final step of this project.

When you have completed Step 5, proceed to Step 6, where you will submit all work for Project 1.

Step 6: Submit Your Work

Thank you for all your work with Maryland Creative Solutions. Take note of the recommended delivery dates in the table below:

Recommended Project Delivery

	Submission week	Deliverable	File-naming protocol
Step 1	Week 1	Skills gap analysis	lastname_firstname_skills_gap_analysis.docx
Step 2	Week 2	Supply and demand graph worksheet	lastname_firstname_supply_and_demand graph.xlx
Step 3	Week 2	Profit maximization worksheet	lastname_firstname_profit maximization sheet.xlx
Step 4	Week 3	Pricing strategies discussion	Submit discussion post in the Pricing Strategies Discussion section in Step 4
Step 5	Week 3	Executive summary	· lastname_firstname_executive summary.docx

ALWAYS DO YOUR BEST @ MCS

When you submit your project, your work will be evaluated using the competencies listed below. You can use the list below to self-check your work before submission.

· 1.3: Provide sufficient, correctly cited support that substantiates the writer’s ideas.  

· 1.6: Follow conventions of Standard Written English.  

· 1.7: Create neat and professional looking documents appropriate for the project or presentation.    

· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.

· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.

· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.

· 3.4: Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making.

· 5.3: Create, implement, and evaluate a personal leadership development plan.

· 6.2: Evaluate strategic implications for domestic and international markets of an organization's industry.

· 10.1: Apply relevant microeconomics principles to support strategic decisions for the organization.

· 12.1: Assess market risk and opportunity.