Unit 5B: Exercise 5-5 Long Run Costs and Economies of Scale

The business I would create would be an ice cream shop that provides fresh onsite gourmet ice cream following strict standards to produce the best and most high quality product for our customers. The name of the ice cream parlor would be Udderly Ice Cream. The plan will be to establish future franchises however, the first location will be a location established in the lower mainland of British Columbia. Research will be conducted to determine the best high traffic area for the first location (i.e. Schools, parks or shopping malls) in order to capitalize on market share. The competitors we would be targeting to steal market share from would be Ben & Jerry’s, Baskin Robbins.

The business size will be a small take out style venue and will have a small amount of stools along the front window area with a narrow table top for some patrons to sit and enjoy (no more than 10-15). The balance of the store will be dedicated to ice cream production in the back and space for the customers in the front to view the products in the freezer area. The back production are need not be to large as all of the product will be manufactured from one standard base product and all of the flavor varieties (from traditional to wacky like jalapeno-bacon, anything with bacon is good).

The short run costs would be labour, rent/lease, utilities, ice-cream making equipment and raw products. The long run cost would be very similar in that the initial concept is to keep the same store size and quantity of labour at future franchise locations. However, the best long run opportunity may be the sourcing of raw products for production.

An example of a local Edmonton based business with a similar model would be the Marble Slab Creamery: Web Page http://marbleslab.ca/index.php/creamery

Marble Slab Creamery Strengths:   1). Unique frozen slab technique of preparation

                                                      2). Uses the freshest and highest quality ingredients

                                                      3). A unique experience as soon as you enter the store

                                                      4). Offers portable slab catering service

Marble Slab Creamery Weaknesses:   1). Product line is very similar to competition

Unit 5A: Exercise 5-3 Law of Diminishing Returns

The Diminishing Returns to Tobacco Legislation
·         Decide which points in the debate have merit.

o   The numerous and visible warnings tend to be discounted or ignored over time.

o   Burdensome taxes and regulations  will increase smuggling activity.

o   There seems to be a correlation between taxation increases and decreases in cigarette consumption.

·         Decide which points lessen the debate.

o   The fact that Quebec entrepreneurs do not abide by the Canadian warning legislation and provide neutral drawings on their packages.

·         In words, estimate the point of diminishing returns for the government.

o   Government warnings and regulations have been in place on Canadian cigarettes for at least ten years. The effect of these campaigns have reached their point of diminishing returns as those who have had the desire to quit already have; those who have not may have curbed consumption due to taxes.

·         What are some other solutions that would increase the government’s production (success) compared to their costs, thus lessening their diminishing returns?

o   Mild forms of prohibition – what these could be other than an out right ban, who knows as a majority of Federal, Provincial and Municipalities have already adopted prohibitive measures such as smoking indoors, some public places and as of late in vehicles with children on board.

o   Dismantling of the private, for-profit, tobacco industry, and its replacement with a sort of public utility that would sell cigarettes in plain wrappers at cost as proposed by the US Food & Drug Administration.

o   Increased taxation on manufacturers of tobacco products.

·         What implications are there in this article for the supply and demand of tobacco (Chapter 2 and 3)?

o   The conclusion I draw from this article is that cigarette smoking tends to be an inelastic product do to the fact that regardless of the price increasing do to taxation a majority of smokers continue with their habit due to the lack of substitutes (supply would marginally decrease however overall demand would not be significantly impacted).

·         Explain the debate in terms of sin taxes (Chapter 4).

o   Sin taxes are levied against products that tend to have public disapproval such as cigarettes and alcohol. The article outlines how the government implementation of taxation plays a direct role in the diminishing rate of return.

Article Link: http://www.pierrelemieux.org/artdiminish.html

Unit 4: Exercise 4-3 • Tourism Industry in Canada

Current State of Canada’s Tourism Industry

Tourism is of economic importance within all regions of Canada. Our borders contain an array land and marine ecozones desirable to the relaxed vacationer or the adventuresome explorer. Despite our magnificent offerings Industry Canada still reports that there are many challenges facing the tourism industry now and in the future. In their document “Building a National Tourism Strategy”, Industry Canada states that cchanging demographics, shifting travel patterns and volatile economic conditions are key obstacles facing stakeholders.

The challenges identified to overcome and strengthen the industry are:

1.     Comprehensive research to better understand the expectations of travelers;

2.     More cohesive marketing and promotional campaigns while reflecting provincial/territorial realities and diversity in Canada;

3.     Further development of Aboriginal tourism;

4.     Human resource strategies to attract and retain employees in the industry;

5.     Investments in tourism infrastructure;

6.     Efficient and integrated transportation systems; and

7.     Broadening and adopting sustainable tourism and best practices. ^[1]

Statistics with regard to current and future growth within the industry vary depending on the source and the metrics used. The industry Canada Strategy notes that Canada’s market share is diminishing due to health concern, terrorist threat and the increased strength of the Canadian dollar. The Industry Canada September 2009 Tourism Highlights report indicates that tourism spending in Canada is up and the arrivals of tourists from outside our borders are down. One can conclude from this that Canadians are opting more for staycations and that the demand domestically may be elastic while the global response is inelastic.

Further statistics and information is also available from the Canadian Tourism Comission. Here is a link to their latest statistics for the month of April 2011. http://en-corporate.canada.travel/sites/Corporate/images/pdf/Research/Stats-figures/International-visitor-arrivals/Tourism-monthly-snapshot/TourismSnapshot_2011_04_eng.pdf . Again based on their data it is difficult to determine if price is a driver of demand (inelastic) for foreign visitors.

---

Unit 4: Exercise 4-2 Elasticity and Revenue

 Fast food prices set to rise: observers
 http://www.albertalocalnews.com/business/Fast_food_prices_set_to_rise_observers_119403699.html?period=W&mpStartDate=03-31-2011&

Article Summary:
1. Prices of coffee went up due to higher cost of ingredients.
2. This is an article from The Canadian Press describing an increase in the price of Tim Hortons coffee in Canada.
3. Higher cost for beans due to poor crops and diease. 

4. Demand for coffee tends to be inelastic since these types of routine purchases tend to be insensitive to the kinds of price increases.

Unit 3A Exercise 3-2 Market Equilibrium Graph

I definitely have a better understanding of using excel to plot curves after this exercise.

Unit 3A: Exercise 3-3 Graphing Changes to Demand

Wow, this one sure took some thought. I originally was looking to see how physical CD sales were comparing to digital sales from ITunes. However, ther ewas not sufficient data available to obtain figures for plotting. I therefore elected to plot individual itunes sales againt the supply that itunes would provide. However, this is actually a futile exercise due to the fact that the digital supply from itunes is infinite.