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Microeconomics 101

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Food combines fine Italian food and more famously, gourmet pizza made from a wood fired oven ... Papa John's Pizza -Pizza Hut -Olive Garden -Bravo. Accounting Profit ... – PowerPoint PPT presentation

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Title: Microeconomics 101


1
Making the Business
The Italian Oven Restaurant
  • Microeconomics 101
  • Presented By
  • Jenn Hosler, Andy Komar, Nick Retos, Ben Musial

2
Contents of Presentation
  • Introduction - Ben
  • Resources  Land, Labor, Capital, Human Capital -
    Ben
  • Corporation - Ben
  • Opportunity Costs - Nick
  • Supply and Demand - Nick
  • Elasticity of demand on food Andy
  • Location - Andy
  • Technology - Andy
  • Substitutes - Jenn
  • Accounting Profit - Jenn
  • Advertisement - Jenn

3
Introduction to The Italian Oven
  • The Italian Oven Restaurant was founded by Jim
    Frye of Ligoneer, Pennsylvania in March of 1989.
  • He formulated the concepts and recipes of The
    Italian Oven in the basement of his house.
  • The first restaurant was founded in Somerset,
    Pennsylvania and soon grew to 110 restaurants in
    the period of about 6 years.
  • The restaurant reached 17 states and Australia.

4
  • Named fastest growing restaurant in 1992 by the
    almanac of food service distribution
  • Food combines fine Italian food and more
    famously, gourmet pizza made from a wood fired
    oven
  • The nationally acclaimed kids menu was hand drawn
    by 7 year old A.J Frye, Jim Fryes oldest child.
  • Fryes main point was to make The Italian Oven a
    family oriented restaurant with reasonable prices
    and delicious food
  • Prices were kept low to attract all class levels

5
Resources
  • Land- The physical space on which production
    occurs, and the natural resources that come with
    it.
  • Labor- The time human beings spend producing
    goods and services.
  • Capital- Long-lasting tools used in producing
    goods and services.
  • Human Capital- The skills and training of the
    labor force.

6
Resources Needed to Conduct an Ordinary Business
7
How do these apply to The Italian Oven?
  • Land- in order to start building a restaurant, a
    site must be picked by the developers.
  • In most cases, The Italian Oven rented a site
    from an owner rather then build a new facility.
    The idea behind this motive is that the
    surrounding businesses will attract customers.
  • Labor- a workforce is needed to upkeep and run
    the restaurant.
  • Capital- money is needed to keep the business
    operational, and turn a profit that makes it
    worthwhile.
  • Human Capital- schooling for chefs as well as on
    the job training for waiters.

8
The Italian Oven is a Corporation
  • A corporation is a firm owned by those who buy
    shares of stock and whose liability is limited to
    the amount of their investment in the firm.

9
What are the opportunity costs of running an
Italian Oven restaurant?
  • An opportunity cost is what is given up when
    making a choice or taking action.
  • Capital invested could have been used for other
    ventures.
  • The time that put into establishing the business
    could be used for many other things.
  • The building that the business is in could have
    been rented for a profit.

10
Supply and Demand
  • When looking at any aspect of a business, we try
    to find an equilibrium point where supply and
    demand meet.
  • For instance, supply and demand curves were used
    to determine the price of pizza at the Italian
    Oven

11
Using the demand curveDetermining the Amount of
pizzas sold per hour (hypothetical)
12
Table showing the number of pizzas made based on
the number of employees making pizza
(hypothetical)
13
Elasticity of demand on various foods served at
the restaurant
  • A PRICE ELASTICITY OF DEMAND TELLS US
  • The percentage change in quantity demanded caused
    by a 1-percent rise in price as we move along a
    demand curve from one point to another.
  • -For example, in Washington, PA, the demand for
    Italian food would be more elastic than other
    foods due to the large population of Italians in
    the city.

14
Italian food is also more elastic under the
following circumstances
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18
Picking the location is crucial to attracting
business
  • Restaurants tend to target areas based on
    wealth, traffic, population, and if consumers are
    willing and able to pay for good quality Italian
    food.
  • - Jefferson Avenue in Washington or, any street
    with heavy traffic would be a good example of this

19
Technology
  • -A set of methods a firm can use to turn
    inputs into outputs-
  • Computers and easier methods to ring in food
  • New use of Coastercalls
  • Fax and E-mail to-go orders

20
Substitutes
  • Are goods that can be used in place of some other
    good and that fulfills more or less the same
    purpose.
  • Substitutes for the Italian Oven
  • -Papa Johns Pizza
  • -Pizza Hut
  • -Olive Garden
  • -Bravo

21
Accounting Profit
  • Does a firm make or break after calculating its
    accounting profit?
  • TOTAL REVENUE ACCOUNTING COSTS ACCOUTNING
    PROFIT

22
Examples of Accounting Costs
  • Raw materials- ovens, land, initial price of food
  • Wages and salaries- amount each laborer recieves
  • Electricity and Phone- cost of utilities
  • Advertising cost- Newspapers, TV commercials,
    etc.

23
Advertisement
  • Local TV and billboards would be the most
    productive form of advertisement for The Italian
    Oven
  • Advertising should target a broad spectrum
    people.
  • The perfect amount to spend on advertising would
    be a small amount of the restaurants profits, but
    steadily attracts customers.
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