Long Run Costs and Economies of Scale - Excercise 5-5

A business that I think would be a neat business and potentially a profitable one would be to open up a food truck restaurant.  This would just be a small business for myself with one truck and two people working the truck.  This would target a small market of industrial workers in select industrial areas of Calgary.  I know from experiance that in these areas there is not a lot of choices for place to eat.  Consumers are limited to brining a lunch from home each day, driving out of the area or at least a bit of a distance away to get to a place to eat, and for those who do not drive they may have one or two choices that are within walking distance to their office.  I would like to target these ares of the city to provide these consumers with an alternative to the normal lunch choices they are exposed to. 

One of the main long term expenses of opening a food truck would obviously be the truck itself.  These run a high price and the payments on this vehicle would also contribute to some of the fixed costs of the business.  Other fixed costs would be the insurance, rent/mortgage payments on your prep-work station (most likely in my home) and as well and the business license to operate the truck.  Some other major costs to keep in mind would be the labour, cooking utensils, food and serving supplies. 

I believe that a food truck in Calgary's industrial areas could be a success because of the demand for more food choices and variaty.  I would have set days that I would be in certain areas of the city and each time I was in those areas I would park in a different area.  Posting the times and position of my truck would be key, but with technology now I can easily start a web page and email notifications for consumers to look and see where I would be that day and at what times.  The joy of having a mobile restaurant would be the ability to switch up the locations and this can target those people that do not drive and would need to walk to your location or those people that would just like to try something new. 

A similar business I found was Fiasco Gellato here in Calgary.  They used to operate out of a single location on 17th Avenue but due to the weather and the short summer season in Calgary and the rising costs of have a stationary location they closed down their locations and opened up a food truck.  They have they same types of major expenses that I would have with a similar type of business.  Their strength is that they not only sell from the truck in the warmer months but they also offer whole sale to businesses to carry their gellato year round.  Due to their product the truck has an even smaller market than my lunch food truck would as consumers would most likely not line up on a nicer winter day to buy gellato, they would be more likely to line up for a warm lunch. 

Image from: http://www.yycfoodtrucks.com/meet-the-trucks/fiasco-gelato-truck/ Information on Fiasco Gellato from: http://www.fiascogelato.com/

Diminishing Returns to Tobacco Legislation Excercise 5-3

In this exercise we were asked to review the article "The Diminishing Returns on Tobacco Legislation" by Pierre Lemieux. 

The issue of tobacco and it's health risks has been an issue for many years for governments.  With all the research that has been done and all of the statistics about the huge health risks people still continue to smoke.  The government has tried to step in with new legislation to deture people from smoking, their methods have had some success according to the article but more can be done.  They have increased the prices of tobacco more than once, plastered imagery of affected organs on the packages and they have limited your access to where you can buy it to try to deture people from purchasing tobacco.  Studies have shown some decrease in consumption but not as much as they would have hoped.  The consumers that are most easily persuaded have quite but the those who value smoking more have not. 

What more can be done to reduce consumption of tobacco?  According to the article they believe that a substantially higher price increase could deture those still smoking.  By increasing the sin taxes by a substantial amount you will see a decrease in consumption.  As there would be no cheaper substitue to tobacco, becasue all tobacco has the same sin tax, families and individuals would no longer be able or willing  to afford the cost of tobacco and the government would see a decrease in consumption. 

The possible side effect of the new legislations that have been implemented and a hike in sin tax in the future could be that there would be a reduced demand for tobacco and because of this reduced demand the supply would go up and there may be a few tobacco producers and suppliers that would not be able to turn a profit and may have to close down.  This would reduce the amount of tobacco that is in circulation reducing the amount available in normal markets and possibly in the black market as well.

In conclusion I think that the point of diminishing returns was from 1995 to 1999 when real prices jumped by another 48% but consumption receded by only 11% down from 1985 to 1995's increase of the real price by 52% which saw an 18% reduced consumption.

An image of anti-smoking crusader Barb Tarbox, who documented her battle with cancer, will be among those featured on cigarette packages in Canada starting in June. U.S. officials announced last year they were considering using Tarbox's image as well.

Photograph by: Handout, AFP

Image from: http://www.canada.com/health/Bigger+anti+smoking+warnings+coming+June/5464028/story.html#ixzz1rwKALEal

Article: http://www.pierrelemieux.org/artdiminish.html