Economic Concepts Worksheet
Concept Application of Concept from Personal Experience Reference to Concept in Reading
Marginal Analysis encompasses two key elements:
â€¢ Marginal Benefits
â€¢ Marginal Cost
Marginal analysis takes into account the costs and benefits associated with a choice. Determining if the costs outweigh the benefits (or vice-versa) assists in making decisions.
Marginal analysis was chosen because it is a diagnostic tool that can be used in effective decision making. In my previous job, I was employed by a biological laboratory. I worked on a specific bench testing whole blood for trace amounts of lead. I asked several times to move positions in order to obtain a ...view middle of the document...
â€ (McConnell & Brue, 2004, p.4)
Microeconomics is evaluating one economic unit at a time. This can range from anything to the price of eggs to the budget of one manufacturing plant.
Microeconomics was chosen because it gives a detailed view of economic decisions. For example: what kind of calling plan to buy. My wife and I recently purchased a new TV. When we determined that we needed a new TV, we first decided what it should be. We concluded that we wanted it to be 32â€, flat screen, and high definition. After these initial factors were defined, we began shopping and purchased one that had all of the features listed above and is the most cost effective for us. Deciding what the TV needed to be (making it â€œall other things equal) made it easier to compare prices.
In my current role, I am responsible for the budget of my department. While the entire leadership team is responsible for the plant budget, I have control over what items my department buys. Dividing the budget between 6 departments makes it easier to determine expenses for the entire plant. â€œMicroeconomics looks at specific economic units.â€ (McConnell & Brue, 2004, p. 9)
Law of increasing Opportunity Costs. A basic explanation of this law is; with the increase in production of a product will cause the opportunity cost to increase. There is economic rationale behind why the law of increasing opportunity costs exists. Not all resources are adaptable for use in alternative products goods or services.
The law of increasing opportunity costs was chosen because opportunity costs exist in all decisions, the more critical the decision, the more the cost goes up. In this program I believe that the law of increasing opportunity costs applies to grades. The better the grade that you hope to attain is related to the amount of time and effort you are willing to devote to obtaining that grade. It is my intent to graduate from this program with straight Aâ€™s; therefore I devote roughly 30 hours a week to each class. The opportunity cost of this is time spent away from my family, and time not devoted to work (I used to do work at home, I no longer have time to do that). The more time I devote to obtaining better grades, the less time I have for work and for my wife.
Towards the end of 2007, we started to upgrade the equipment at our plant. The idea behind the upgrades is to increase productivity and efficiency. While the construction is going on, we are forced to slow down production for a period of 5 months. Production will not stop, but it will be hindered. The harder we push the construction crew, the more it interferes with normal operations. In other words, the opportunity cost of getting the project done quicker is slower production.
â€œOur example illustrates the law of increasing opportunity costs: The more of a product that is produced, the greater is its opportunity cost (â€˜marginalâ€™ being implied).â€ (McConnell & Brue, 2004, p. 27)