Starting a new business “Catering” Exercise 5-5

I’m planning to start a catering business; It will be a small business as a start, I will rent a small place and supply it with the equipment and tools necessary to produce few kinds of food, the business will include an outlet to sell the product, in addition, I will use my car as a start to distribute the products to different supermarkets and shops.

Also will use the media networking (like Internet, Blackberry, What’s up...etc) to make an advertisement to the business and will offer free delivery to individuals, and the payment will be cash at delivery point.

The fixed cost will include:

-        Lease payment of the business.

-        Equipment and cooking tools and machines.

-        Annual insurance.

-        Fees to get the approval and other payments to set the business.

-        Business taxes.

The variable costs:

-        Wages to the employees.

-        Food raw materials.

Implicit costs:

-        Using my private car.

-        I’ll loos my job, which I get paid for it recently.

-        The opportunity cost of my budget.

-        I’m expert in cooking, so I will bake and cook myself and hire assistants only, so cost of my payment will be considered as implicit cost.

My goal is to make my business a “brand” and to be known in the local markets. The plan is to keep the small business for two years and if the demand for the products will increase and the profit gained will be above the normal profits, I will think of taking a loan from my bank and expand the business and open a small factory with line productions of the most demanded products in the markets.

I could not find in the Internet any similar ideas, sure there are much similar ideas but I could not find one listing the answers to the requested question.

On the other hand, I found many websites help starting successful catering businesses, below are a couple of such websites

http://www.cateringbusinessideas.com/

http://www.cateringbusinessguide.com/

They include so many details and costs that I did not think about it in my study especially for the long run cost, Catering supplies and other expenses.

The Diminishing Returns to Tobacco Legislation "Reader's notes" Exercise 5-3

Points in the debate have merit:

-        The actions taken by the governments to reduce tobacco consumption.

-        Illustration the phenomenon of diminishing returns.

-        Numbers given showing the success in reducing tobacco consumption in the last ten years.

-        Giving reasons for decreasing returns to government intervention.

Points lessen the debate:

-        The debate does not include any reports or suggestions of any health care organizations to reduce tobacco consumption.

-         Did not concentrate on the roll of media in the awareness of smoking risks, in addition to the government roll, but instead they argue that “Too much information may also kill information“ , I’m not quite sure how far is this statement accurate!

The point of diminishing returns for the government

In my opinion, the point of diminishing returns for the government is indeterminate, although we can say that the government will reach the diminishing returns when it increase the factors which may lead to reduce the tobacco consumption, so by September 2002 where the last action were taken by the government which was to force the manufacturers to print on cigarette packs the effect of tobacco related diseases may be the point of the diminishing returns for the government afterward.\

The government may fund some activities which can increase the awareness using media campaigns, also it may create some ideas in this concern to be processed by some NGO’s or some organizations or educational institutes, like arranging a marathon to the smokers to be sponsored by the manufacturers of the cigarettes and it’s income may be devoted to researches related to the dangers of smoking and its relationship to cancer diseases.   

The debate include some information regarding the supply and demand of tobacco products, in 1985-1995, the supply increase mainly because of taxes and the demand decreased by 18%, while in the later period (1995-1999) we can see the supply increase more while the percentage of the demand decreased only by 11 percent.

As the cigarette have a very inelastic demand, we can see that the debate suggest that the government should increase the taxes “Sin taxes” to achieve the same results achieved in the earlier period.

Tourism industry in Canada Exercise 4-3

            The tourism sector makes an important contribution to Canada's economy in every region of the country, the tourism sector is made up of several industries, including

·       transportation

·       accommodation

·       food and beverage

·       recreation and entertainment

·       travel services

            Canada's Federal Tourism Strategy sets out a new approach to strengthening Canada's tourism sector and helping it continue to make a significant contribution to the Canadian economy.

            The tourism in Canada is not only international, the domestic tourism plays a big role in the tourism industry in Canada, for example Canadian travelers made 229.2 million domestic trips in 2010, up 0.9% over 2009. Most of these trips (9 out of 10) were within the traveler’s province of residence, also Canadian residents accounted for 80% ($58.5 billion) of total tourism spending in Canada in 2010, the sixth year in which the domestic share of tourism spending increased, while the total international arrivals have been trending down for the past 10 years, reaching 24.7 million in 2010, mainly due to the decrease in U.S. visits and mainly after the crises Travelers from the U.S. accounted for 45% of Canada's international travel receipts in 2010, down from 59% in 2000.

            For the majority of people, tourism is a luxuries and not a necessity, as their income increase, expenditures on tourism will become greater.

Elasticity and Revenue Exercise 4-2

An article published on Music giant chops prices to combat downloads, “you can find the article in the link below”

http://www.theglobeandmail.com/news/technology/music-giant-chops-prices-to-combat-downloads/article1013846/

The given data in the article may provide us with some important numbers like (the price, the demanded quantities and their changes percentage, total revenues which enables us to know the elasticity of the good and other info.

The table below show the price, Quantity demanded and the total revenue extracted from the given information:

Price$	Quantity (Million)	Total Revenue ($)
21	48	1 Billion
15	62	930 Million

Notes:

-        old Prices are given ($19.98, $20.98 and $21.98) so I considered the old price is 21$

-        new price is $14.98, I assumed it is $15

We can see that the price elasticity of demand = 0.76
As long as it’s less than 1 then the CD’s are considered inelastic good
When the goods are inelastic and the prices fall the total revenue fall also and this happened when the price decreased to about $15, the total revenue reduced from 1 billion$ to 930 million$.
Reducing the price will not bring a higher revenue to the CD’s producers, they have to think of a way to make the downloads from the Internet with charge, and when this charge goes high, the consumers will think of a substitute good, which is buying CD’s, in this case the demand for the CD’s will increase leading to an increase in the total revenue.  

Below is the Graph drown from the above table