ecnm

Michael (M.O.) Olabisi, PhD. CLASS PROJECT – ECNM 592 FALL 2015:

What is expected from the report: Chapter {Demand} Describe the main sources of demand for Tesla Energy. Explain why there will (or not) be a market for Tesla Energy's offerings. Feel free to describe in detail the number of potential customers, as well as the factors that change the expected level of demand for each customer category.

Chapter {Costs} Describe the costs associated with the production of Tesla Energy's products. Explain how these costs relate to the business's profitability. Furthermore, explain long-run and short-run costs, and the shutdown rule that describes the conditions that call for closing the business.

Continue the section with an assessment of fixed and variable costs for this business. Address how economies of scale and or economies of scope may affect Tesla Energy's costs.

Data Sources [Please find other sources in addition to these initial suggestions, as needed.]: [1] Number of households; Number of households by income level (US Census - American Community Survey) [2] Rented vs owned households(http://www.census.gov/housing/census/data/) [3] Number of companies (http://www.census.gov/econ/susb/) [4] Private Sector Energy use (http://www.eia.gov/consumption/residential/) [5] Energy Use by Industry (http://www.eia.gov/consumption/) [6] Solar Installations by State (https://openpv.nrel.gov/rankings; http://www.seia.org/research-resources/solar-industry-data)

News Sources [These are initial suggestions to get you started. Dig further.]: [1] Battery costs (Search Factiva in the Business Library) [2] Other components of power storage systems (Search Factiva; Also consider using IBISWorld Reports – also in the Business Library).

SAMPLE OUTLINE: Section: Demand Current Analysts' projections suggest that Tesla Energy is poised to be the only significant player in a $12b market [cite analyst source].

Tesla Energy's main offerings are [describe each product in detail; should be at least two paragraphs].

These products offer consumers potential savings in at least [a given number] of ways: First, they allow residential households with solar panels to [describe benefit to customer further, include $ estimates of savings]. [Use data sources #3 & 4 to get estimates]. Second, [repeat explanations of customer benefits for other segments].

From the data, we expect [provide a number estimate] households (or businesses etc) to be potential Tesla Energy customers.[See data sources #1, 2 & 3]. The estimate is from [describe how you got your estimate from the total number of US households, businesses, etc.].

The foregoing strongly suggests (or does not suggest) that many customers, even customers not committed to a vision to preserving the environment- have an economic incentive to adopt Tesla Energy's products. [Explain further, or summarize previous paragraphs' claims that the products offer (or do not offer) a unique value proposition to customers and are therefore likely to succeed (or fail)].

As with any normal good [feel free to include a footnote to justify the claim that power storage batteries are normal goods], one expects several factors to drive the level of demand: this report will focus on five. {1} the prevalence of solar-generated electricity, [for the prevalence of solar-generated electricity, use data source #6] {2} household income, {3} product price, {4}..., {5}.... [List and explain your selected set of factors. If possible, use separate paragraphs for each factor and feel free to use examples to justify the include of each selected factor].

In summary, one could write the following demand function (or the following set of demand equations) for Tesla Energy's product offerings.

[Write out your demand function: you do not have to specify the coefficients or estimate them in any rigorous manner].

Section: Costs

Tesla Energy's product offerings are expected to be profitable (or not profitable) in the near- term. [Justify a statement like this by showing whether demand at current prices should cover costs: back up the claim by first describing what you think are the main elements of Tesla Energy's costs - e.g. Lithium Ion batteries, R&D, Depreciation on factory construction, ..., etc. Identify which of these are relevant economic costs. Describe costs further to justify your first claim at the start of the Costs section]. [Feel free to use other sources of data- e.g. news articles or guesstimates to support your claims].

Describe short-run costs vs. long-run costs for Tesla Energy. If you think there are issues or potential upsides with either of these cost categories for Tesla Energy, describe each briefly.

For short-run costs, [describe variable and fixed costs]. Provide numbers, graphs or other clear claims of how these costs should vary with the level of demand. Make this relevant to the main claim of profitability. [Feel free to also describe the shutdown rule].

For long-run costs, the observed increasing (or decreasing) returns to scale suggest that long- run average costs should be lower (or higher) for Tesla Energy. [Describe economies of scale and how it could apply to Tesla].

[Describe whether Economies of Scope could exist for Tesla Energy as a part of Tesla Motors. Justify your claim with a clear definition of economies of scope.]