Assume an individual is considering opening a new car dealership in a

Assume an individual is considering opening a new car dealership in a medium-sized metropolitan area (population = 200,000 ).

Provide a list of economic variables you would recommend that the person consider in making his decision whether to open the business, and explain your rationale for including each variable.

ANSWER

At a minimum, it would seem that the decision maker should consider 1 ) the current number of dealerships in the area, 2 ) the types and quantities of vehicles that consumers in the local economy currently purchase, 3 ) the income in the local economy, 4 ) the level of unemployment both locally and nationally, 5 ) projected trends in unemployment, and 6 ) possible policy changes that might be undertaken by the central bank or the federal government.

1, 2 and 3 would give the decision maker a sense of how strong the market for his product might be. Information on unemployment in the local economy would provide useful information in this regard as well. 5 and 6 would provide information on what the decision maker could expect in the coming months, especially regarding whether demand for his product is likely to grow or decline.