Running head: WEEK TWO REFLECTION

Week Two Reflection Katy A. Kelly, Joseph Lilly, Claudia A. Medina-Castillo, Wayne Montes de Oca ECO/561 June 18, 2012 Melaku Teshome

WEEK 2 REFLECTION

Week Two Reflection During week two, Team Cohorts discussed more methods of Economics and cost factors. The Cohorts team also discussed the objectives for week two and learned how to identify production levels to maximize profits, how to balance fixed and variable costs and how to apply economic cost concepts in making business decisions. The Cohorts team further discussed that trade-off is defined as the opportunity cost that can be driven by the invisible hand or self-interest. These concepts were expanded from week one to further understand the elastic and inelastic relationship of a business or product. The factor market was discussed and defined as the building, factory, land, or nonperishable. The product market was identified as the goods and services, which are provided to customers. A discussion of how goods and services may only last a short time and the cost to get in and out of a market depends on the companys elastic or inelastic factors. The greatest gain of understanding came from the creative destruction discussion. Some companies are built to do one thing, produce a specific product. However, if the production of that product does not constantly improve over time the company will fail. The constant state of improvement is critical to an organization for cost savings and product improvement. For an example of what makes a cell phone company expand is the improvement in technology. For instance, the company Apple is a perfect example of creative destruction. In the beginning, Apple had some great products but over time was overrun with competition like HP, Gateway, Dell, IBM, and others. The comeback the company has made through creative destruction is the creation of the i products. Through thinking outside the box and constantly changing the

WEEK 2 REFLECTION

current ideas of convenience, Apple keeps consumers wanting and waiting for what they will come up with next. Derived demand was a concept a little harder to understand. Marginal revenue product should equal marginal resource cost at a ratio of one to one. Team Cohorts learned that when a company has two sections working together, and one section is getting the work done faster than the other, they need to provide resources to assist the team whose is working slower. If this does not happen, the process will slow down and will not be as productive as it could be with the correct allocation of resources. Team Cohorts took the derived demand understanding toward the law of diminishing returns and understood that by increasing labor but not additional resources would slow production. If two people were trying to work on the same area for competing demands, one will have to wait until the other was complete. This concept meant that there is a point of getting too many people to accomplish one task. The work and production in point of fact would increase if the amount of workers was decreased or the allocation of space requirements was broken down better. The value of understanding the concepts in week two were highlighted in the conversations in class and the learning team members use of scenarios to define the economic principles. Business application of economic principles learned in week two will help the team members in application to their present and future business endeavors.