Business Finance Homework Help

INSTRUCTIONS: In your responses to your peers, comment on at least two posts that discuss a different economic principle than the one you chose. Draw connections between the different principles and the role of microeconomics in everyday life.

MY POST:  When making business decisions, the principle I am most likely to apply is that rational people look to maximize their utility. Rational people understand that not all decisions are black and white (Mankiw, 2021).  Keeping this principle in mind reminds me that when consumers are looking for products, they are always looking for the best deals wherein they really get the most out of what they’re spending. This means that as a business owner, I must be able to price my products competitively in order to appeal to consumers while also making sure that their money is well spent so that they can continue to patronize the business. Another principle would be that people respond to incentives as it is evident that consumers tend to gravitate to products when they know that they are getting a deal, products are on sale, or that there are free items or services included. This strategy can help me maximize business potential by trying to have incentives that would push consumers to purchase our goods instead of our competitor’s. 

POST FROM CLASSMATE #1 Justin Warfield 

When looking at microeconomics, we can see some of the small changes that are used to help a business become stable and succeed.  Some of the principles I would use when making business decisions would be how society faces a short-run trade off between inflation and unemployment and then the cost of something is what you give up to get it (Mankiw, 2020, Chapter 1–4) . For inflation and unemployment, which would be to understand wages and the minor changes I could make to maintain my staff and cut costs. The second principle would be would would I want to keep in my business to make profit and what am I willing to give up for it.

POST FROM CLASSMATE #2 Lexie Coppinger

Microeconomics has every effect on a business. All of the smaller details within businesses and their means of effective operation and eventually, hopeful success, make-up microeconomics. If the availability of a resource is slacking, then the production time will be delayed. If the production time is delayed, then purchasing decisions among business owners is altered. If those business purchasing decisions are altered, then so is the consumers opinion on purchases, and so forth. 

 After reading all of the principles covered in Chapter 1, I found myself continuously going back to the very first principal: “people make tradeoffs”. This principal effects many of the other principals, such as “the cost of something is what you give up to get it” and “rational people think at the margin”. For example, let’s consider a small coffee shop. While the first person is preparing the store to be open, a routine needs to be set. If they choose to get an extra hour of personal time (or sleep) and do not arrive early enough before the store opens, goods will not be prepped and ready, thus delaying the production of purchased goods, and potentially effecting the number of customers, business income, and worst – reputation. However, by arriving an hour early, all needs will be adequately prepped, thus effecting the efficiency of daily operations and customer interactions as a whole, positively putting an effect on business income, customer satisfaction, a positive reputation, and happy employees. 

 Another example of “people make tradeoffs” are the items the business owner chooses to sell. Although a favorite family-renowned baked good is sure to satisfy customers, the time it takes to make the baked good cuts into time that could be utilized to create 2 different baked goods, but double the amount of total goods. The owner has to decide on utilizing that time to make the favorite baked good A, but only ensure (for example) a total of 10 items to be sold, or do they choose to utilize that time to make 2 different baked goods, baked goods B & C, that are still good, a guaranteed 20 items can be produced, but the baked goods are not as renowned as baked good A? Assuming all baked goods are sold at the same price, an obvious answer seems to produce baked goods B & C at 20 items sold, rather than baked good A at 10 items sold. However, baked good A has a much higher customer satisfaction rate and renowned reputation vs. baked goods B & C. This is certainly an area where “people make tradeoffs” applies as the owner makes their decision.