Microeconomic Analysis - Essay Example

Microeconomics Analysis With the current economic condition and trends, many business organizations and households are looking forward to saving on their expenditures. Energy is a major cost driver in the businesses and households. Cindy has realized the existence of a business opportunity in starting a contracting business in the installation of solar panels. However, Cindy is in fear of losing all her life savings in venturing into a business that is not worth or profit generation. The demand of solar panels is influenced by a number of factors that either cause the demand to shift or move along the demand curve.

Government subsidies, the product having the intervention or encouragement of the government is likely to have high demand the US government is boosting the installation of solar panels. This leads to creation of awareness of the product and thus an increase in the demand.The cost of other substitutes: electricity is the major substitute to solar panels (Denholm 2007). The high cost of electricity as compared to solar panels is pulling away many individuals to consumer the solar panels.The commodity is price elastic; a slight increase in the price of the solar panel will not harm its demand in the market.

This therefore this is a profitably business opportunity for Cindy. PriceQuantity demanded$2080$3080Price elasticity = change in Quantity Change in price 0/10= 0This means that the demand of the solar panels is not affected by the price.Price Demand of solar panels Quantity demanded Between 2006 and 2011, Europe represented more than 70 percent of global solar installations. In 2008 and 2010, the region made up roughly 85 percent of installations, the supply of solar panels therefore is a major factor in determining whether to venture into the contract business (Denholm 2007).

Supply in the number of commodities the suppler is willing to sell at a given period of time. With the government intervention in the supply of the commodities the supplies have a ready market to supply to. This therefore enhances the demand to supply the commodity. The willingness of individual households and businesses to install solar panels is a major boost to the willingness of the suppler to produce the goods. Then levels of inventory have remained low in the recent past and therefore the venture is a great opportunity for Cindy.

Recommendation The region has expressed a huge market for solar panels with the government subsidy and the high cost of substitutes then the business is most likely to be a profitable venture for Cindy (Denholm 2007). I recommend her to venture into contract installation of solar panels and will definitely get the return on investment.Word CitedDenholm, P., & Margolis, M “Evaluating the Limits of Solar Photovoltaic’s (PV) in Traditional Electric Power Systems” Energy Policy, 35, 2852-2861, 2007.