Economic Analysis of Gasoline Consumption

Brief introduction Brief introduction

Yossi Spiegel

spiegel@post.tau.ac.il

Why study economics?

Microeconomics is mostly a set of tools designed to help you think about economic problems – it’s a “way of thinking” How is this “way of thinking” help?

Finance Marketing Strategy Operations Management Organization Behavior Information Systems

Prices & Markets 2

Levels of creative thinking Benjamin Bloom (1956)

Knowledge - exhibits previously learned material by recalling facts, terms, basic concepts and answers Comprehension - Solving similar problems Application - solving problems by applying acquired knowledge, facts, techniques and rules in a different way Our course focus on “application”

Prices & Markets 3

Warren Buffet: “Pricing Power Beats Good Management When Evaluating Companies”

Warran Buffet in an Interview with Bloomberg on Feb 18, 2011

“The single most important decision in evaluating a business is pricing power,”…If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” “The extraordinary business does not require good management,” Buffett said in the interview, which was conducted on May 26 in Omaha, Nebraska. “I knew nothing about the management of Moody’s,” said Buffett. “If you own the only newspaper in town, up until the last five years or so, you had pricing power and you didn’t have to go to the office.”

Benjamin Hermalin, a professor of economics at Berkeley’s Haas School of Business:

“If you have a really dominant position you can survive for quite a long time with bad management but eventually it will catch up to you,” said Hermalin. “In the short run I would agree with Buffett but in the longer-run perspective there is something to be said for having a good manager.”

Prices & Markets

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What’s economics?

Paul Samuelson:

“Economics is the...