ECONOMICS COURSEWORK

Economics Coursework



Economics Coursework

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant information relating to analysis of short-run cost. In this paper, the author will evaluate and explain the number of staff the hotel would choose to employ, and the number of customers it would seek to serve, in order to be operating most cost-efficiently.

Discussion

Component A

There is always a positive relationship between the number of input and the volume of output i.e. an increase in the input results in the increase in output and vice versa. This relationship is not confined to a particular nature of work; this relationship exists in almost every activity being conducted on either personal or commercial basis. The input refers to the injection of raw material or labour by the firm to produce the final good or service, whereas output is the finished goods or services of the firm which are being produced by utilizing the input injected in the first place (Parkin, 2000). For instance, a tailor stitches one shirt per day, he decides to hire another worker and they together start stitching two shirts per day. After some time, there are 10 workers assigned for the job who together stitches 10 shirts per day. This example is just an evidence of how input-output relationship actually works. Apart from that, there are also some other factors that affect the relationship between the input and the volume of output, these factors include: cost efficiency, marginal utility, marginal cost, average cost, total cost, opportunity cost etc. For this assignment, we will limit our discussion to cost-efficiency factor and its affect on the relationship between input and output.

The hotel is considering offering a series of special Christmas functions. In making its decision on how many staff it might need to employ, and by implication how many customers it might wish to serve, at each of the functions it is initially only concerned with where it would be cost-efficient rather than where it would maximise its profit. In case of hotel, employing more staff will result in more output, i.e. the number of meals that could be served as a result in a two-hour period. Although employing more staff would be beneficial for the hotel as it would help them to serve more customers in a two hours period, however the output is not the only factor that hotel decides to take in to consideration, the management of hotel is also concerned with how much cost it would incur if it employs enough staff to fulfil the needs of 135 customers. This phenomenon will be discussed in detail in component B of this assignment. At this time, we can only assure the hotel management that if the hotel decides to employ more staff, they will be more productive.

Component B

The relationship between level of output and cost depicts that an increase in output would also result in the increase of variable ...