Question

It is Common Sense that we need to pay our Daily Operating Bills [e.g. material costs, hourly wages, electricity, etc] to run a business! In economic terms, these operating Bills are Variable Costs [TCO C]! Think about why some businesses are laying off people while they are still making positive profits

Answer 1

Ans.

To run a business there are various bills called variable costs . Other than this there is fixed costs as well. A business making positive profit is able to pay the cost easily but still it layoffs people. Because a business wants to work in efficient manner. Sometimes some employees working have little or no bearing on profit of business. By laying off these employees company can use this money from their salaries to do investment that would provide greater investment. Moreover laying off people who are not performing in there respective departments is also beneficial because such people who are poor performers may be bringing down the production and effectiveness of business. Layoffs have immediate effect on costs as it reduces immediately such as wages. Although studies show that layoffs do not result in improved profit in long term. As they have to incur cost again on providing training to new employees. Employment reduction are profitable in short term but not in long term.