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It says Tesla here but our group chose Airbnb as our project company so please do research on Airbnb not Tesla! The key concepts should be used for more than 8 of them in part 1 Demand and Cost Analysis. I also post my class ppt for you to overview the key concepts if you need my text book please let me know and I will email you! Here is my email address [email protected] Thank you !

CLASS PROJECT – PROJECT DESCRIPTION

Project Description

You are to advise the board of Tesla Motors (TSLA) about the recently launched Tesla Energy division. Should Tesla Energy continue to be part of the company? Should the company sell Tesla Energy so that it can focus on cars?

Tesla Energy was announced to great fanfare on April 30, 2015. (You can read more about it here http://www.teslamotors.com/presskit). Its main products will be Powerwall™ batteries for residential energy storage, as well as PowerPack™ batteries for utilities. Energy storage can help utilities to lower costs: without it, utilities must pay to power up and power down plants in response to peaks and ebbs in daily demand. For consumers, batteries allow power to be drawn from utilities at cheap off-peak rates (or from solar panels), for use when utility prices are at peak-rates.

Suggested Report Sections

Part 1: Demand and Cost Analysis

Motivate your report with an assessment of Airbnb potential to create and sustain demand. Specify how much demand you expect in the short to medium term. Describe the expected cost structure for Airbnb and how those costs should vary with demand. (Section 1 should be 3 – 5 pages).

-Key Concepts

Student groups get 1 point for a meaningful use for any of the course's key concepts. (See the Key Concepts List below). Three conditions must be met to earn each point: [1] the idea must be correctly defined or explained, [2] the definition or explanation must be relevant to the context, and [3] every statement of fact that supports the application of the key concept must be correct and supported.

Project teams may earn points for 15 of the key concepts in the list. Using more than 15 key concepts in the report is strongly encouraged, but the maximum score remains 15, at 1 point per key concept.

Examples:

[Sample 1] Tesla can benefit from economies of scope. Economies of scope means using the same factory for more than 1 product. (0 point; incorrect definition - definition not tied to context).

[Sample 2] Tesla can benefit from economies of scope. Economies of scope implies that the costs of two separate product lines is higher than the cost of one integrated production operation for the two product lines. (0 point; correct definition - but definition not tied to context).

[Sample 3] The Gigafactory, which will produce batteries for cars as well as America’s 50 million households, can help Tesla to achieve economies of scope. The costs of a combined operation for these related product lines should be less than the costs of operating (0 point; correct definition - definition tied to context, but key concept tied to unsupported fact. The U.S has more than 50 million households – statements about population like these should cite a data source like the U.S. Census).

[Sample 4] With the Gigafactory, which will produce batteries for cars as well as households, Tesla should achieve economies of scope. The costs of a combined operation for these related product lines should be less than the costs of operating separate production processes (1 point; correct definition of economies of scope- definition tied to context).

-Context (10%)

Teams that provide insightful recommendations and a clear conclusion statement that answers the question raised by the Project Statement earn 3 points. (No points for groups that do not answer the question).

Thorough explanations of the industry in which the company competes, the product, what it does, how it is produced, and its value to potential buyers earn teams 2 points.

Teams earn 5 points for having all the following: [1] Dollar estimates of future demand for the product at a set of hypothetical prices, based on a demand function. [2] A well-researched cost function that is linked to some data, [3] a decision tree to explain how the company could make a choice under uncertainty, [4] at least one table to show highly relevant data and [5] at least one graph to visually highlight one of the points in the report.

Table and graphs must be properly referenced in the text, and their data sources must be cited. (Tables or graphs without proper citation and references get no points – see explanations below under style).

-Style(5%)

Every team automatically gets 5% for style. However, teams lose style points for flaws in the report. All style points may be lost in any of the following ways.

-Typographical and Grammatical Errors: Groups lose 0.2 points for every typographical or grammatical error. (A maximum of 1 typo every three pages may be forgiven, i.e. 4 for the 12 page report). Teams that wish to self-review should simply count the number of typos and grammatical errors, divide by 5 and subtract from 5. To be clear, this means that an otherwise perfect report with more than 29 gets no points for style.

-Organization (layout): There is a 0.5 point penalty for each instance of paragraphs that go on too long, sections that do not follow a logical order, and differences in style or font between report sections. A good report should have one idea per paragraph. The sections should reflect the result of a carefully planned report outline.

-Organization (Fact references): Each incorrect/incomplete reference or statement of unsupported fact without a reference incurs a 0.2 point penalty. The statements may incur an additional penalty by invalidating a key-concept point, dollar estimate, table or graph. Reports that use more than one reference style lose a point. End notes, footnotes or APA reference styles are all fine, as long as each team chooses and uses only one.

-Graphs and tables: There is a one point penalty for each incorrect graph or table – the penalty applies to incomprehensible graphs and tables, tables/graphs that do not cite a source and tables/graphs that are not clearly linked to the report with an explanation.

Key Concept List

CLASS 1

Individual or Consumer's Demand Curve

Firm Demand Curve

Market Demand Curve

Demand Function

Price Elasticity of Demand

Income Elasticity of Demand

Forecasts from demand function

CLASS 2

Relevant Costs: Sunk Costs

Opportunity Costs

Marginal Costs

Component Substitution and Costs (Leontieff vs. Cobb-Douglas)

Average Costs

Short-run costs: Fixed Costs

Short-run costs: Variable Costs

Long run costs

Economies of Scale/Diseconomies of scale

Economies of Scope

Minimum Efficient Scale

Shutdown rule

CLASS 3

Perfect markets

Monopoly

Oligopoly

Cartel/collusion

Price wars

Kinked Demand Curves: i.e. dropping price in a competitive setting may hurt profits

Porter's 5 Forces

Prisoners’' Dilemma

Non-price Competition

CLASS 4

Market failure

Market failure: Time Inconsistent Preferences

Market failure: Information Asymmetries

Market failure: Market or Monopoly Power

Market failure: Externalities

Regulation: How it addresses market failure

Regulation: Anti-trust action

Regulation: Standards, permits and caps

Regulation: hybrid arrangements like cap and trade

Private payments or negotiated alternatives to regulation (Coase Theorem)

Policy support for positive externalities through patents, R&D etc.

CLASS 5

Risk is not uncertainty. Decisions with limited information.

Rational decision making

Rational decision making tools: Decision trees

Expected Value and or Expected Utility

Risk aversion

Risk management approaches

Common decision-making pitfalls

CLASS 6

Trade Barriers

Trade Costs

Intra-firm Trade

Foreign Direct Investment (FDI)

Informational Issues in International Trade