Faculty of Business and Economics

Question: Write about theFaculty of Business and Economics. Answer: This is a general tendency for every economist to resort to various assumptions at the time of making different models. These assumptions of economists create the difference between an economist people coming from other professions. One of the most important assumptions is the opportunity cost (Rios et al., 2013). Opportunity cost helps every person taking decisions regarding their day to day activity. Every economist provides emphasise on the efficient allocation of resources. Opportunity cost helps in efficient allocation of economic resources. This is essential for increasing the productivity of the economy. Another important assumption is the cost benefit analysis. People in the economy take any decision without considering the cost benefit analysis. Hence people generally take any decision in a very simplistic manner. Taking any decision without any rational thinking is not productive. In case of alcohol consumption people generally take the decision to consume alcohol or not t o consume in a very simplistic manner (Rehm et al., 2009). Therefore this decision is casual in nature. In case of economists, they take the decision considering the benefit of consuming alcohol the cost associated with it. Similarly in other day to day activities, decision making in a very calculated manner is necessary. Economists make every model on the basis of those assumptions which help in reducing the cost attached with any decision. Opportunity cost is one of the most important concepts in economics. If any person takes any decision to perform any activity, some opportunities as well as some cost must be attached to it. Loss of opportunities by any person is considered to a cost to that particular person. Opportunity cost has to be taken very seriously by every person in the society. In case of Chris who is an economist, has entered into a bar. After a certain limit, he started thinking about the consequence of consuming extra alcohol. Chris identified the benefits as well as different costs associated with consuming another beer. A benefit from the point of view of Chris after consuming another beer is the pleasure. This would give Chris opportunity to enjoy the life get rid of the stress of the week long work pressure (Henderson, 2008). On the other hand Chris also has to sacrifice a lot of things this is defined as the opportunity cost to Chris. Chris has some hobbies these are stamp collection playing pl aystation. Both these hobbies mean a lot to Chris. If Chris consumes extra beer, he has to sacrifice all these hobbies. Since waits weeklong to play with playstation, missing that opportunity will be very costly for him. After identifying all these benefits costs of taking the decision of consuming extra beer, Chris has found out that the costs are outweighing the benefits. Hence, Chris has taken the decision to leave the bar when he was feeling very tipsy. According to Jessica ordinary people generally do not fit into different models which are built by economists for rational individuals. Rational individuals take any decision following economic models. Since economic models are built on the basis of various assumptions these assumptions are helpful for the economy as a whole, therefore, rational individuals follow these models carefully. She has provided various reasons to establish the validity of the statement. These are as follows: It is not possible for general individual to identify the actual consequences of any decision. In case of consuming alcohol, the consequence varies from one individual to another. Hence people become unable to take the right decision (Boardman Boardman, 2008). In every model of economics every decision is based on few assumptions deviating from any of these assumptions lead to the breakdown of the model. Hence, for every individual the consequence is not same. Most of the people do not measure the opportunity cost associated with any decision. Opportunity cost helps a person to take rational decision. In case of alcohol consumption if somebody takes any decision regarding quitting alcohol, measuring the opportunity cost is very essential. People most of the time are influenced by the herd behaviour. Sometimes coming under the force of other friends or relatives people takes any decision (Nas, 2016). These decisions are taken under the peer pressure. Hence, in this case also people do not fit into models built by economists for rational people. Rational people generally take any decision among different alternatives on the basis of the cost benefit analysis. Every decision of people is based on different benefits costs. Rational people generally compare these benefits costs. If benefits outweigh the cost, rational people accept the decision. On the other hand opportunity costs also help these people to take any decision. If there are different alternatives the rational people have to choose any one of these alternatives, opportunity cost helps these people to identify the highest opportunity cost associated with every alternatives. Finally the action which involves least opportunity cost is adopted by the rational person (Mishan Quah, 2007). In case of Chris who is an economist, has entered a bar. After consuming alcohol up to a certain limit he has started thinking whether cost associated with consuming extra beer will outweigh different benefits or not. If he consumes extra beer, he has to sacrifice the hobby of stamp collection playing with playstation. After comparing the pleasure associated with the consumption of extra beer with the cost, he found out that the cost outweighs the benefit. Hence he left the bar. This article is not only confined within the theory, it can be applied in practical decision making process. Before taking any decision, every person should identify different possible benefits costs associated with any activity (Williams, 2008). This helps in taking rational decisions. Though it is not possible to predict the actual consequences of any decision, but thinking from the point of view of an economist, it is possible to reduce the cost associated with any action. References Rehm, J., Mathers, C., Popova, S., Thavorncharoensap, M., Teerawattananon, Y., Patra, J. (2009). Global burden of disease and injury and economic cost attributable to alcohol use and alcohol-use disorders.The Lancet,373(9682), 2223-2233. Henderson, D. R. (2008). Opportunity cost.The concise encyclopedia of economics. Boardman, A. E., Boardman, A. E. (2008).Cost-benefit analysis. Pearson. Mishan, E. J., Quah, E. (2007).Cost-benefit analysis. Routledge. Williams, B. (2008). Cost-benefit analysis.Economic Labour Market Review,2(12), 67-70. Rios, M. C., McConnell, C. R., Brue, S. L. (2013).Economics: Principles, problems, and policies. McGraw-Hill. Nas, T. F. (2016).Cost-benefit analysis: Theory and application. Lexington Books.