Project 1-Microeconomic Analysis

Case study - Situation B
Starting a contracting business in installing solar panels.

Prepared by
Lina Hijazi

Professor John Sharifi
Keller Graduate School of management
10 November 2014

This research paper was prepared to help my neighbor Cindy to make a decision on starting up a business in installing solar panels. Cindy heard about the cost saving that households and businesses can make each year by installing solar panels on their roofs, she also heard about the government incentives. Cindy expressed her interest in saving environment by reducing pollution and serving a good social purpose but she doesn’t want to risk her life saving on a venture that might not succeed or become profitable enough.
In order to assist Cindy and give her my recommendation I will have to research the market and determine the factors of success. I will be preparing a case study to address the determinants of supply and demand, with respect to government subsidies provided for using solar power and I will study the Price Elasticity accordingly. Economists measure the costs and benefits as Marginal, (extra costs and extra benefits) by interpreting the demand & supply curves. Efficiency is optimum only where the extra costs and benefits are equal in production and consumption. To start my study, I will have to understand the Solar Power system components and benefits. The Solar power system is environmentally save, do not produce air pollutants and when located on buildings, there is minimal impact on the environment. The Solar energy can be converted into other forms of energy, such as heat and electricity in two different ways:
1) Photovoltaic (PV devices) or solar cells which change sunlight directly into electricity. Individual PV cells are grouped into panels and arrays of panels that power single homes, to large power plants covering many acres.
2) Solar thermal/electric power plants generate electricity by concentrating solar energy to heat a fluid and produce steam that is used to power a generator. In 2012, solar thermal-power generating units were the main source of electricity at 12 power plants in the U S.
The technology is improving every year, making solar power systems smaller and more efficient, system consists of solar panels, inverters, batteries, and a charge controller.
The United States is now poised to lead the world in solar energy installations within just a few years as lower costs for the technology and zero-down financing plans and subsidies lure people across the nation to cleaner forms of power that save money and energy. (Scott Martin, 2011)
The Solar energy is most effective when integrated into an efficient design, therefore Cyndi shall be providing an appropriate design study in order to compete with others.

In all type of Businesses and contract, individuals seek to increase demand for their goods and services so they can raise prices and boost profits. In economics, there are two independent factors that determine price in competitive markets (Supply and Demand) each of them examines relationship between Price and Quantity assuming all other factors are held constant at first. The combination of these forces determine how much of a good or service is produced and consumed in an economy and at what price. These steady-state levels are referred to as the Equilibrium Price & Quantity in a market. The study of Price Elasticity of demand is an important process for understanding how markets work.
For example: Grain markets usually suffer from inelastic supply. The grain prices stay low, Grain output in the short term are not affected by price (resulting in an inelastic supply curve) but output is affected by weather conditions, which shift the supply curve.
In general markets work best when demand is Elastic.

There are other factors, besides price changes that influence an individual’s quantity demanded. These factors are to be held constant (Ceteris