Question

a. What would be a situation in your personal or prefessinonal life in which you apply or could apply marginal analysis to make an economically sound decision?

b. how would you determine Marginal Benefits and Marginal Cost of a business decision? Illustrate your answer will a numerical example.

c. why do economists believe that managers should use marginal analysis to make optimal business fecision?

Answer 1

(A) we can apply marginal analysis both in personal and professional life , for example in professional life , working extra hours leads to extra productivity or wages. if are spending more hours at work than usual hours and if we are provided extra wage and bonus for extra work that we do than we can analyze that margical cost - benefits analysis..

(b) business decisions that we take based on alternative options we have. and among options which is economical and effective by its nature of implementation . business decision like increse or decrease production. sales, all are based on marginal analysis of external and internal environment. for example if we are planning to increase our sales volume than we have to do marginal analysis of extra business that we can generate by attracting customer. for this marginal cost of advertising, promotion that we consider will decide what extra benefits we can generate from that.

marginal cost and marginal benefit based on various activities that consider to implement and we also measure maximum benefits with least cost possibility so that efficiency and effectiveness of decision can be understood.

(C) Economist consider marginal analysis is important to measure any activity whether it related with life or business can change your outcome. marginal analysis definately helps in deciding good and bad impact of various activity that we consider to take from business point of view. marginal analysis of various products and services decide their future and their profitability scenario that a business should consider. for example marginal analysis consider  buying and making a product in organization decide whether firm will get benefit by producing in house or it should purchase it from outside and label them .marginal analysis consider marginal cost and marginal benefit that business manager visualize from business point of view.