Week 2 Discusstion Marginal Analysis

Week 2 Discusstion Marginal Analysis - The purpose of a...

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Why is Marginal Analysis important in economics? How does the tutorial Understanding and Applying Marginal Analysis at the end of this week's lecture reinforce the concepts of marginal analysis? How can any firm find the right output level to produce at which guarantees maximum profit (or minimum loss)? Before jumping to answering the question about Marginal Analysis we need to evaluate why companies actually exist. What are the major purpose for each business? What questions do companies always ask? There are different types of businesses and with the different types, comes a different purpose or goal. In general the purpose of any business is to provide a good or service to the consumer. One source I found explains that many confuse the purpose of a business with the management purpose. Management’s purpose is often to gain profits, but ultimately the goal of the business is to meet the needs of their customers. One example is a hobby based company.
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Unformatted text preview: The purpose of a hobby business such as the comic book store down the street from my home is to have fun. Sure they need to make the necessary profit to cover their expenses, but the sole purpose of the company is not to just make money. The one time I went there with my dad, the owner actually told him that. He gave my dad a discount for being a loyal customer. The owner indicated that he knows it may not always be the best way to make money, but if the customers keep coming back, he gets to keep his shop open and he loves his job. Other types of businesses such as schools or museums provide a necessary service. There are some for-profit schools and museums but the primary goal of the not-for-profit locations is to educate youth and provide care for those that are ill. Sources: http://www.business.ualberta.ca/rfield/PurposeofBusiness.htm http://www.businesspundit.com/philosophy-of-business-what-is-the-purpose-of-business/#net...
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This note was uploaded on 03/26/2012 for the course ECON GM545 taught by Professor Gotches during the Summer '11 term at Keller Graduate School of Management.

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