Economic Analysis of Business Practice
Opportunity cost comes up a lot in life without you realizing it, but taking an economics course you are giving a name to something even small children do. For instance 6 year old Sally would consider the opportunity cost of her having a play date with a friend equal to the number of television shows she will miss and more specifically what television shows she will miss. Depending on the value of the show in her head she determines whether she is willing to sacrifice watching it to play with Sally.Right now in my own life I am weighing the opportunity cost of my time and money. Will it be easier to hire someone to re-do our kitchen or do it ourselves. In the end I determined it was better to hire someone rather than using up vacation days or weekends to do it, spending more money to fix mistakes as we aren’t professionals, and to overall keep the health of my relationship good. For anyone that has even done a home project the greatest cost is always to the relationship because you argue about everything, even things you didn’t realize you cared about because you are so stresses balancing work and getting this project done in a timely and quality manner. Opportunity costs don’t always have to be about money, but the value you place on what you have to give up to gain something else.
A record 40% of American households with children under the age of 18 have a female as the main breadwinner, and a growing proportion of these are women whose salaries are higher than their husbands, a new survey shows. The study, based on U.S. Census Bureau data, also found that Americans remain conflicted about the role of mothers in the workforce although agreement is widespread that having two working parents raises living standards for families.Female workforce participation rates are rising in many developed economies – overall rates in the UK, for example, are not far behind those in the US. Economists say this is an encouraging trend among populations where the numbers of working age are set to fall sharply over coming decades. Tax revenues from the growing army of working women will help to cushion the rising cost of pension and healthcare benefits in ageing economies.So-called US “breadwinner moms” fall into one of two categories; 5.1m are married women with incomes higher than their husbands, while a larger group of 8.6m are single mothers. The first group has grown dramatically over the past 50 years. In 1960, only 4 per cent of women with children out-earned their husbands compared with 15 per cent in 2011, nearly a fourfold increase. The number of households headed by a single woman has also risen sharply, nearly tripling in that time. The survey’s findings suggest that, just as in Europe, the stigma of having a baby while being unmarried is dimming in the US. Women who had never been married accounted for 44 per cent of households headed by a female, up from just 4 per cent in 1960. These are amazing stats. But Americans are less ambivalent than they were more than a decade ago about the benefits of mothers with children being in the workforce at all. The disadvantage is when mothers work outside the home; it is harder to raise children. Work Cited: Cohen, N. (2013) Women the main breadwinners in record 40% of US homes. Retrieved from: http://www.ft.com/cms/s/0/7a185746-c869-11e2-acc6-00144feab7de.html#axzz3QR1RSBvI
Most women that are the breadwinners in their family still do not feel that they have an equal share of financial decision making with their partner or significant other. Studies reveal that women are more concerned about the amount of debt they have and saving for retirement rather than what the men are concerned with (state of economy, retirement). I find the cartoon interesting because research also reveals that although there are a large percentage of women breadwinners in today’s households many of them choose to keep it a secret. These women choose to keep it quiet because they feel it will embarrass their significant other or they feel it is just a private matter. Whatever the case women in the workforce have changed significantly over the last few decades; more and more women are becoming leaders in corporate America still able to maintain a household and raise their children while bringing home more money than their significant other. Women are primary breadwinners, whether they like it or not. (2012, Jul 11). Business Wire Retrieved from http://search.proquest.com/docview/1024423005?accountid=8067
Honestly, this is an extremely funny cartoon. Regardless of which spouse is staying home or is the breadwinner - there are huge trade offs that effect both the economy and the home. After WWII women were needed to fill in for what was considered masculine jobs while our men were abroad fighting the war. This forever changed the dynamics of the family roles in the US and gave women the confidence to leave the home and earn money. Today, most women are working out side of the home. The opportunity cost of women leaving the home to pursue outside opportunities is greater than if she were to stay home. And regardless of which person stays home and which one goes to work, the stay at home parent deals with performing household tasks, meal preparation, and childcare, social networking, volunteer work on any given day. Yet staying home raising children and taking care of the home, seems to have little $value.Most of us make decisions daily in the simplest sense: 'Decision Making is the act of choosing between two or more courses of action”(www.skillsyouneed.com). However, opportunity cost, is a result of a decision that was made. “The opportunity cost of an alternative is what you give up to pursue it - the trade off” (Froeb, at el P.25). Women received a lot of slack for wanting to work outside the home. Opportune cost were: child being home alone, the breakdown of the family scheduled, the lonely days, and unappreciated chores. “The tradeoff in a two income household less production occurs at home, while more goods and services are demanded from the market.” (Business.baylor.edu)http://www.skillsyouneed.com/ips/decision-making.htmlFroeb/McCann/Ward/Shor: Managerial Economics, A Problem Solving Approach, 3rd edition, 2013http://business.baylor.edu/Tom_kelly/2307ch4.htm
Firstly, the comic was funny; but it is also an awesome illustration of opportunity cost and how every decision we make in life is somehow linked to cost. It reiterates the notion that decisions should be considered from an economic value standpoint. In the case of the cartoon, the husband pointed out that when he and his wife make the choice to be intimate, they give up the opportunity to work. Her work is valued at $100/hr. and his is valued at $10/hr. Ultimately, he pointed out that she pays significantly more in opportunity costs than he does.Froeb, et. al. (2016) says, "When deciding between two alternatives, you obviously want to choose the one that returns the highest profit. Accordingly, we define the 'opportunity cost' of one alternative as the forgone opportunity to earn profit from the other." He continues, "...costs imply decision-making rules, and vice versa. If the benefits of the first alternative are larger than its cost - the profit of the second alternative - then chose the first. Otherwise, chose the second." (pg. 31-32)I suppose we do this frequently in life without even realizing it. For example, I could take $100 in expendable income and add it to my retirement; but instead I choose to take my family to the amusement park. The choice to go to the amusement means that I forewent not only the $100 in my retirement, but all the interest it would earn over the next 20 years. Clearly, the benefit of family time and happy kids was worth more to me than additional retirement funds. As I get closer to retirement and have a full understanding of my financial outlook, maybe I’ll wish I had thought that through more! Froeb, L. (2016). Managerial economics: A problem solving approach (4th ed.). Boston, Mass.: Cengage Learning.
Opportunity costs are everywhere and often thought about without even defining them as such. Are you willing to live in the suburbs and have an hour commute or live in the city for presumably something shorter? Like the comic, what is the value of the time spent on your commute? Are the trade-offs of living farther from work worth the longer work days? Understanding all factors associated with making a decision is crucial as any decision will have consequences, positive or negative. In this example, besides time away from home there might also be other factors to consider such as the cost of transportation, vehicle maintenance or fuel costs. After evaluation, if the solution yields the suburbs as the answer than the valuation of all factors considered is less than that of the perceived opportunity costs, what is being given up in pursuit. It’s also important to recognize when a situation may change causing re-evaluation as costs and decisions are always linked.