Economic Concepts Worksheet
University of Phoenix
MBA501 Forces Influencing Business in the 21st Century
Economic Concepts Worksheet
ConceptApplication of Concept from Personal ExperienceReference to Concept in Reading Law of Increasing Opportunity Cost
As more resources are moved from the allocation towards the production of one good to the production of another good, the opportunity costs increase because the resources are not as efficient in the making of the chosen product.
This is an important concept to me because the changes in my company's industry are happening faster than the workforce can be trained and technological equipment purchased.
Our company has been experiencing greater competition in the marketplace and has lost business to other companies, making sales revenue fall. In order to make up for this loss of revenue, the company has laid off a large number of employees. At the same time the company is moving from traditional products and services to new products and services. The employees remaining with the company are being required to take on more projects and new tasks that they are not necessarily trained or skilled at completing. Because of this skill set mismatch within the workforce the company pays more for the new products as services as it increases production.
"The law of increasing opportunity costs: The more of a product that is produced, the greater is its opportunity cost" (McConnell & Brue, 2004, Chap. 2, p. 27). Opportunity Cost
Opportunity cost measures what must be given up to have another unit or service.
I have included this concept because opportunity costs are reflected daily in the market and personal choices made.
My husband and I have been considering trading in his old vehicle for a new car. His car has been paid off for several years. We have been considering the trade-offs that will have to be made in order to finance a monthly car payment. The vehicle that we like the most will mean a $500 monthly payment, and we have determined that the opportunity cost of this purchase will be giving up our spring vacation to Florida. We will be weighing the value of the new vehicle with the value of the vacation to determine if the purchase is worth the opportunity cost. "The amount of other products that must be forgone or sacrificed to obtain 1 unit of a specific good is called the opportunity cost of that good" (McConnell & Brue, 2004, Chap. 2, p. 27).
Factors of Production
In order to produce products and services certain resources must be used. These resources are an important part of the economy and are what I manage at work for my company.
At work we use all four factors of production to produce and deliver products and services for our customers. Land is necessary for us to build our telephone switch buildings and to lay cable. Labor answers customer service calls, installs telephone equipment, and creates marketing plans. Capital is necessary for manufacturing telephones. Entrepreneurial ability is necessary to devise and implement business plans for revenue generation (McConnell & Brue, 2004, Chap. 2, p. 23).
"Land, labor, capital,
and entrepreneurial ability ( ) are combined to produce goods and services, they are called the factors of production" (McConnell & Brue, 2004, Chap. 2, p. 24).
Scarcity and Choice
This concept is important because in our personal lives and in the business world we all have limited incomes and time and must make decisions about how we will spend our resources. Resources are scarce, and we must make choices about using those resources.
At work our promotions budget is limited, and we must make choices about what products and services we will purchase for sales contest prizes. We have to determine which prizes will bring the most value and motivate the sales team to sell the most products in order to win. For instance this month we decided to use gift...