Demand, Utility and Marginality
Trident University
Alexander M Wayt
Demand: Utility and marginality
ECO201 - Microeconomics
Dr. Radu Munteanu
15 June 13
Introduction When running a business, calculating margins is an essential component. Margins not only can help us figure out what our total revenue will be, they also help us decide if we need to expand as a business, stay where we are, or try to downsize. Of course other factors can be put into this as well; did prices of the goods and services we provide go up? Does this mean we should hire more people? When is a good time to hire more people? These are all things I’ve learned from this module’s reading material.
Demand for Labor Increased From a company’s perspective, there are factors that indicate we should hire more people. There are plenty of reasons why this may occurs. There are also plenty of possible benefits from increasing the amount of employees. More employees can lead to increased revenue, as long as we haven’t hit the point of diminishing the firm’s output. The point at which the firm’s output begins to diminish occurs because of the law of diminishing returns. Let’s look at a few different examples of applicable factors that can change our demand for labor. To start, let’s suggest that a company has extra reference manuals. Since they have extra reference manuals, each unit of labor (employee) should be able to get more work done (Rittenberg and Tregarthen.) Since there are extra reference manuals, the company can continue to hire more people. Hiring more people has a good chance of increase the company’s marginal product since there are enough capital goods to go around. This is assuming that they don’t hit the point where output starts to diminish per unit of labor. Even if the marginal production is starting to go down, it is still possible for total production increase enough to make it worth hiring a few more people. A second factor that could increase demand for labor is an increase in land. If a
Alexander M Wayt
Demand: Utility and marginality
ECO201 - Microeconomics
Dr. Radu Munteanu
15 June 13
Introduction When running a business, calculating margins is an essential component. Margins not only can help us figure out what our total revenue will be, they also help us decide if we need to expand as a business, stay where we are, or try to downsize. Of course other factors can be put into this as well; did prices of the goods and services we provide go up? Does this mean we should hire more people? When is a good time to hire more people? These are all things I’ve learned from this module’s reading material.
Demand for Labor Increased From a company’s perspective, there are factors that indicate we should hire more people. There are plenty of reasons why this may occurs. There are also plenty of possible benefits from increasing the amount of employees. More employees can lead to increased revenue, as long as we haven’t hit the point of diminishing the firm’s output. The point at which the firm’s output begins to diminish occurs because of the law of diminishing returns. Let’s look at a few different examples of applicable factors that can change our demand for labor. To start, let’s suggest that a company has extra reference manuals. Since they have extra reference manuals, each unit of labor (employee) should be able to get more work done (Rittenberg and Tregarthen.) Since there are extra reference manuals, the company can continue to hire more people. Hiring more people has a good chance of increase the company’s marginal product since there are enough capital goods to go around. This is assuming that they don’t hit the point where output starts to diminish per unit of labor. Even if the marginal production is starting to go down, it is still possible for total production increase enough to make it worth hiring a few more people. A second factor that could increase demand for labor is an increase in land. If a
References: Bouman, J. Principles of microeconomics. Retrieved from https://cdad.trident.edu/Presentation.aspx?course=13&term=111&presentation=126380 Rittenberg Libby and T. Tregarthen. (2009). Chapter 12: Wages and Employment in Perfect Competition. Sections 1-4. Retrieved from http://www.web-books.com/eLibrary/NC/B0/B63/059MB63.html