Basic Economics Essay Example | Topics and Well Written Essays - 2750 words

Basic Economics - Essay Example The next step of the decision making model is to explore alternative options or solutions. Decision makers always face some challenges at the time of taking decisions. Decision makers are required to have some alternatives, which influences their decisions. The forth step of the decision making model is to make prediction for the future consequences. Prediction is important for decision makers to be prepared for the future. The fifth step is to prepare and make a selection of all the outcomes of the model and last and very important is to execute a sensitivity analysis for ensuring that decisions are made on the basis of analysis. For instance, absence of any step in the procedure of decision making will be accountable for inappropriate analysis of a situation, which will be accountable for making unsuitable decision by managers leading to losses in businesses (Samuelson and Marks 7-14). Marginal analysis is an important factor in managerial economics for the managerial decision making. There are several advantages of marginal analysis in the business as well as individual life. Marginal analysis helps to maintain the balances among the desire of individual needs and business needs. A firm is benefited from marginal analysis in the procedure of decision making, so that business operations can be conducted systematically. Additionally, marginal analysis aids policy makers of firms for managing the resources in a proper manner (Samuelson and Marks 29-75). The marginal cost is the additional cost, which occurs at the time of production. Marginal cost includes the extra cost of labour and materials cost. On the other hand, marginal revenue is the additional profits earn by a firm at the time of surplus sale of products. Marginal revenue aids a company in performing business operations in a better competitive nature. Marginal analysis is mainly calculated at the time of additional turnover. In this