ECON 5315 Mondelez-Hershey Purchase

1. Based on the article “Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger – WSJ” and “Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey – WSJ” i attacked in files below.. answer the question below: (atleast 150words)
How does the purchase of Hershey provide Mondelez with potential benefits related to learning economies?
2. Make 2 replies for 2 discussions below (each one atleast 150words).. please provide charts, pictures, sources if necessary
i. Nick
Question #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?
Gasoline, diesel, jet (or turbine) fuel, and hydrocarbons used to produce polymers and waxes are produced from distilling and refining crude oil. When one hears “refinery”, they should think oil refining for the production of primarily gasoline and diesel. Oil is the main input for refineries, which means any cost change related to oil directly affects the cost of anything produced from oil. This means that as oil prices increase, prices for gasoline, diesel, and plastics all increase as well. Greater regulation on the transportation of gasoline can have an even greater impact on prices, especially when combined with an increase in oil prices. Many are trying to regulate away oil pipelines, which are currently the safer, cheaper, more efficient means of oil transportation, and force the use of more trucks and trains for the transportation of oil and gas. The use of fuel guzzling vehicles to transport that which makes them run only increases prices further because it also increases the price of transporting the crucial input for refineries.
Additional comment of Nick: I need to clarify the safety comment about pipelines. When I think safety, I think in terms of human life and property destruction, however there are other ways of viewing which is safer, and depending on your particular view, there maybe a safer means of transporting crude oil.1
ii. Jason
Micro Review Discussion Question #2:Gasoline and Restaurants Complementary Relationship
Question#2. 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?
When petrol prices increase, an individual has a relatively limited ability to manage their gas consumption. Due to commutes to school and work and children’s extracurricular activities, people still need to purchase gas. Therefore, gasoline is a moderately inelastic good since price fluctuations have negligible influences on demand. Even though individuals can limit their vacations via cars when gas price rise, one area that people may attempt to salvage savings is by limiting their restaurant, and dining endeavors. A study by JP Morgan Chase found that during times of decreasing gas prices that for each dollar less spent at the gas pump; individuals spent 20 cents of that saved dollar at restaurants based on credit and debit transactions (Farrell & Fiona, 2016). This research by JP Morgan shows that lower gas prices may prompt customers to go out to restaurants and possibly spend more. An alternative argument would be that high gas prices would encourage people to eat out less.
Fast-food service often relies on folks who commute via car and lack the necessary time to prepare a meal. If gas prices rose, these commuters would more actively monitor their driving mileage and may go to fast-food establishments less frequently. Furthermore, a small business that is heavily dependent on delivery and passage of goods is profoundly impacted by the price of gas. During high pricing season in the gas markets, some establishments may decrease the frequency of deliveries or enforce surcharges on delivery orders to counteract the rising gas prices. Another option would be for food delivery industries to minimize or limit the radius of geographic service areas.
An economic complement is corresponding good that is often used in conjunction with another good or service (Besanko et al., 2015). Since gas prices influence the amount spend at restaurants, gasoline price would be a complement of the restaurant industry particularly the delivery and fast-food sectors. It isn’t necessarily true that restaurant meals are an economic complement of gasoline since the price or demand of restaurant foods does not significantly influence gas demand, utilization, or cost.
I value your feedback, opinions, and input in this topic and look forward to an enjoyable discussion on this topic.
Besanko, et al., Economics of Strategy, Wiley, 7th Edition, 2015, ISBN 978-1- 119-17477-6
Farrell, Diana, and Fiona Greig. “How Falling Gas Prices Fuel the Consumer: Evidence from 25 Million People.” JP Morgan Chase & Co Institute. Retrieved on March 28 (2015): 2016. and Strategic Fit