Question

Imagine the year is 2018, long before COVID-19 . Your family has started a new venture: operating a car wash near a popular lakeside resort, just outside of Prince George. There are many other car wash ventures nearby, and there seem to be new ventures opening and closing all the time. You can see that the customers care only about finding the cheapest price for car washes; they do not care which car wash they use. Your family purchased the equipment and the building for the car wash. You were able to spend $1,000 of your savings to go towards this purchase. To cover the rest of this expense, you took out a small business loan. The cost of the loan comes to $15 per day for the next 3 years. Your venture must hire labor and purchase cleaning solutions, car wax, etc. to operate the car wash. After some research you have figured out that the cost for labor and supplies is as follows: Number of car washes sold per day Total cost for labour and supplies 1 $10.67 2 $12.67 3 $16.00 4 $20.67 5 $26.67 6 $34.00 7 $42.67 8 $52.67 9 $64.00 10 $76.67 11 $90.67 12 $106.00 13 $122.67 14 $140.67 15 $160.00 16 $180.67 17 $202.67 18 $226.00 19 $250.67 20 $276.67 ECON 201 Introduction to Microeconomics 2 • When the lakeside resort is open, you observe that you can charge a price of $15.00 per car wash. • When the resort is closed, the demand for car washes is much lower. You are only able to charge a price $6 per car wash. Right now the resort is open. Currently you are selling 17 car washes per day. Your family wants your advice. Prepare a 1-2 page report to advise your family what to do now AND what to do when the resort is closed. Use the report to help them understand why they should follow your advice. Remember that this report should be written as if it is advice to your family, and it must show your family how you came up with the advice. What do you suggest, and why do you make the suggestions you do?

Answer 1