Opportunity Cost Harvard Case Solution & Analysis

Opportunity Cost

When a best alternative is chosen among different alternatives, then loss of those alternatives or loss of value upon those alternative is called opportunity cost. In economics, opportunity cost is a fundamental cost which helps in cost benefit analysis and in decision making processes.

Opportunity cost of going to college is time that is expected to be spent in college, forgone of leisure with respect to attending classes in college and money that spend on buying books, paying college fee and traveling cost of going college and coming back home.

It is expected that paying college fee involves about 50% of the total opportunity cost of going college. The second largest opportunity cost could be the time that is expected to be spent in college for tut ion purpose. Other opportunity costs include books cost, cafeteria expenses, travelling cost and leisure cost however, these costs carry less percentage as compared to time and college tut ion fee.

Marginal Analysis

Marginal analysis cold be about marginal cost and marginal benefits. It is expected that the additional cost which is incurred due to taking a course of action is called marginal cost. Similarly additional benefits that could be incurred from taking a specific course of action are called marginal benefits.

On daily life, decisions are mostly taken on the basis of margins. For example the cost of making 9 sandwiches is $90 and of 10 sandwiches is $110 then marginal cost of making 10th sandwich is $20. While the average cost is identified by dividing the total cost with the total number of goods produced. In manufacturing business the selling price of an item is identified by calculating the average cost of a unit and then adding a profit margin upon manufacturing cost. However, it depends on the management of the organization that which method is following in order to set the selling price.

Positive and Normative

Positive economics is expected to be objective and fact based while Normative economics is expected to be Subjective and value based. Economic Cooperation and Development told that they will reduce the price of oil and will also decrease the unemployment rate which plays an important role in the growth of 34-nation group of developed economies, which could also help the countries by offsetting the impact of a slowdown in emerging economies. It is an example of Normative Macroeconomics because it is a subjective based information regarding growth of 24 nations  (DALTON, Nov-2015)

The European Union asked Volkswagen to provide details regarding irregularities that Volkswagen commits and details of emission of carbon dioxide from its vehicles within 10 days. It is also expected that the German auto maker could be charged heavy fine from the European Union with respect to this irregularities. This statement is an example of Positive Macroeconomics as it is objective and fact based about the behavior of the overall European Union Regarding Environmental Pollution.(Steinhauser, Nov. 9, 2015 )

Vodafone Group PLC instead of increasing the infrastructure cost the full year earnings of the company is sending a positive signal with respect to growth in European markets. This statement is Normative Microeconomics as it is a subjective statement from a company regarding the behavior and resource utilization of an organization. (ZEKARIA, Nov. 10, 2015)

Chinese authorities arrested a high profile manger because he was found in a fraudulent activity of insider trading and stock manipulation. Moreover, they ceased the shares owned by his mother and it is expected that the worth of these shares is more than 675 million dollars. This statement is Positive Microeconomics as it is an objective and fact based statement about the behavior of the Chinese government regarding fraud. (DENG, Nov. 10, 2015)..........................

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