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Running head: WEEK TWO REFLECTION 1

Week TwoReflectionKaty A. Kelly, Joseph Lilly, Claudia A. Medina-Castillo, Wayne Montes de Oca

ECO/561

June 18, 2012

Melaku Teshome

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WEEK 2 REFLECTION 2

Week TwoReflectionDuring 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 wereexpanded from weekone 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, ornonperishable. Theproduct 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 builtto do one thing, produce a specific product. However, if the production ofthat 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

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WEEK 2 REFLECTION 3

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 oneto one. Team Cohorts learned that when acompany 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 downand will not be as productive as it could be with thecorrect 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 decreasedor the allocation of space requirements was brokendownbetter.

The value of understanding the concepts in week twowere highlightedin theconversations 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.