TWO QUESTIONS = 4 PAGES NEEDED - 2 PAGES PER QUESTION Read the following articles and answer the questions below with a 2-page minimum for each question. Oil could vault as high as $150 a barrel,...

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TWO QUESTIONS = 4 PAGES NEEDED - 2 PAGES PER QUESTION
Read the following articles and answer the questions below with a 2-page minimum for each question.

Oil could vault as high as $150 a barrel, veteran analyst warns, as undersupply meets surging demand

Already soaring gas prices could reach $7 a gallon, one expert warns

Rising fuel costs impacting truck drivers, consumers

Frontier to merge with Spirit Airlines in deal valued at $6.6 billion


Part 1: How should we expect the cost of oil to affect the cost of producing gasoline, diesel and other oil-based products in the US and other parts of the world? Why? What is the effect of changes in gasoline prices on the demand for restaurant meals? Is gasoline an economic complement of restaurant meals? Are restaurant meals an economic complement of gasoline?
Part 2: Describe/explain how Frontier, which is merging with Spirit Airlines, is pursuing economies of scale. Describe/explain how Frontier is pursuing economies of scope. How does the merger with Spirit Airlines provide Frontier with potential benefits related to learning economies?
Answered Same DayApr 13, 2022

Solution

Rochak answered on Apr 14 2022
8 Votes
Part 1:
Oil price and cost of producing gasoline, diesel and other oil-based products are directly related across the whole world, which means that when the oil price increases as mentioned in the article “Oil could vault as high as $150 a ba
el”, it will lead to an increase in the price of other products which are produced from oil, like gasoline, diesel and other oil-based products all of which have oil as their primary raw materials.
This rise in the price of oil affects the price of all the oil-based products is because the oil-based products are extracted from the raw oil (i.e., crude oil), whereas gasoline, diesel are all refined products of crude oil, therefore all the oil-based products have crude oil as their major raw material component whose percentage can range from around 50% to 90%, therefore a rise in price in the oil will directly increase the price of all oil-based products.
Change in gasoline prices will affect the demand for restaurant meals negatively because the rise in the price of gasoline will mean that the meals at the restaurants will become more expensive and when the prices of products increase the demand for them automatically decreases until the price reach to the equili
ium again or the income of the consumers consuming the products increase, therefore with an increase in the price of gasoline the demand for restaurant meals will decrease, and when the price of gasoline decreases in any circumstance the demand for restaurant meals will increase as the meals will become cheaper.
Economic complement is the goods that are consumed together which means that when the demand for one good increases the demand for the other goodwill increases automatically as they are complementary goods, and that is why...
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