Business Proposal
ECO/561 Economics

Transportation is an industry that continues to evolve and with every major contribution to the industry takes another leap forward into a new technology era for transportation. The Wright brothers were one who made a huge contribution. “Wilbur and Orville Wright made four brief flights at Kitty Hawk with their first powered aircraft” (Wright Brothers). Other inventions such as the automobile, railroad train, and boat have set in place the staples of transportation. Over time these inventions move faster and more efficiently and with the ability to carry more people or product. “Today, there are approximately 19,000 rental locations yielding about 1.9 million rental cars in the United States” (Monestime, 2007, p. n/a). Today rental companies allow a person to drive a car, boat, or plane for the amount of time a person will use the rentals. The newest contributions to the transportation industry are Zipcars. This company allows people to “drive cars by the hour or day which include gas and insurance” (Zipcar). Zipcar is comparable to booking a reservation at a restaurant without any haggles.
The market structure that Zipcar has entered is a pure competition structure. Because there are numerous firms such as Avis, Hertz, and Enterprise each of them is trying to sell the same product which is using a car for an extended period. These companies have no effect on market price they adjust to changes in the market. People who get rental cars will not pay more to rent a car at Enterprise than they will at Zipcar. It is a free entry and exit market that means anyone can enter the market and exit the market without any obstacles. Zipcar offers the chance for people to join their network of thousands of cars only needing a Zipcard and an account. Competition comes from two main sources in the car rental industry and that comes from vacations and airports. Zipcar is changing that mentality by offering stations for anyone to access a car at any time. To sum up, the difference between Zipcar and other companies is that they are using car sharing whereas others use car leasing.
The elasticity of Zipcar will be high because of the changes in price of its competitors and will affect the quantity demanded or supplied. Because car rentals are not a necessity in people’s lives, and they are waiting around for people to rent them there is a high elasticity. On the other hand Zipcar is trying to make the market more of a need than a want. By offering cars at anytime and making the ease of access very simple, they are pushing the boundary of inelastic. It will never be anything like medication but through good marketing strategies they will be able to win over a few customers. Because Zipcar is in a purely competitive market the elasticity of supply and demand is affected by the price drastically for its company. Those looking for a car to use will always search for a company that has lower prices as oppose to a company who has more options. “Marginal revenue is the change in total revenue (or the extra revenue) that results from selling one more unit of output” (Flynn, Brue & McConnell, 2009, p. 177). By increasing the amount of locations to get a Zipcar and ease of accessibility the marginal revenue will increase with every additional unit reserved. If there is a decline in marginal revenue and marginal cost is starting to rise by decreasing the hourly rate or daily rate to get a Zipcar until marginal rate equals marginal cost will be the point where profit maximization occurs. As already mentioned, adjusting the amount of locations to get a Zipcar is one non-pricing strategy that will affect revenue and economic profit or loss. Another would be the cars purchased and used as Zipcars. Getting quality used cars with higher mileage but are in a good condition will be another strategy to assist the business in saving in cost. To increase barriers of entry into