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Situation: Sohel is a BBA student studying in a private university in Dhaka.

He wanted to buy a
DSLR camera which he needed for his photography career. On the other hand he also required to
replace his computer as it became old. Sohel had a budget of Tk 85,000 which he saved up for
two years. Sohel had to choose between buying a camera or buying a computer or upgrading his
old computer.
Why this situation:
1. In this situation, Sohel has to choose between two items that is not equivalent or mutually
replaceable, which makes it very difficult to decide which decision to make.
2. The decision involves relatively big investment, leaving no space for any mistake.
Estimating cost and benefit: Sohel needed the camera so that he can make some money out of
his hobby. For a camera that will satisfy his hobby of taking photo and nothing more, Sohel is
willing to pay Tk 15,000. But as he is buying the camera for professional use, he must consider
the amount of money this camera will earn him and determine the total benefit.
On the other hand, he needed a computer not only for his day to day activities, but also his
studies. He has a desktop computer, but comparing to the available computers, it was slow. For a
computer, Sohel decided to buy a laptop instead of upgrading his old desktop because of the
mobility and trendiness. For a laptop that is decently fast, can operate all the necessary office
programs and offer good video and audio quality, he is willing to pay up to Tk 65,000.
Sohel came up with the following choices:
1. Canon 550D DSLR camera with Tamron A16 17-50mm f/2.8 lens for Tk 84,000
2. Dell Inspiron Laptop with Intel i5 processor for Tk 56,000-74,000 (depending on RAM
and HDD size)
The camera stated above is likely to last for 24 months. With this camera Sohel can get entry
level to medium level photography jobs which will pay on average 2000 taka. It is not likely that
Sohel will get jobs from the very beginning as he needs to build a reputation. But if he can prove
himself he will get jobs from some photo agencies he knows. By the volume of jobs the photo
agencies give away, Sohel estimates once he proves himself hell get 3-4 jobs per month and it
will take almost a year before he gets to that level. Therefore, Sohel estimated, in 24 months, he
will be able to manage Tk 72,000.
So, the total benefit from the camera is Tk (15,000+72,000) or Tk 87,000. As the cost of the
camera is Tk 84,000, the economic surplus is Tk (87,000- 84,000) or Tk 3,000
On the other hand, a laptop can be at different prices, shown below:

2GB RAM, 320 GB HDD costs Tk 56,000;


2GB RAM 500 GB HDD costs Tk 58,000; (180GB HDD for Tk 2,000)
4GB RAM 500 GB HDD costs Tk 60,000; (2GB RAM for Tk 2,000)
4GB RAM 750 GB HDD costs 62,000; (250GB HDD for Tk 2,000)
6GB RAM 750GB HDD costs Tk 68,000; (2GB RAM for Tk 4,000)

6GB RAM 1000GB HDD costs Tk 74,000.(250GB HDD for Tk 6,000)

Costs of per GB ram change with the total size of the ram. This is expressed in the graph in the
next page

Cost of per GB RAM vs RAM size


1200
1100
1000
900
800
700
600
500
400
300
200
100
0
0 GB

Cost of per GB RAM vs RAM size

2 GB

4 GB

6 GB

From the graph above, we can see the optimum amount of RAM is 4GB because after 4GB the
cost increases.
Also, cost per GB HDD space changes with the total size of the HDD. This is expressed in the
graph below:

Cost of per GB HDD vs HDD size


14
12
10
Cost of per GB HDD vs HDD size

8
6
4
2
0
0 GB

320 GB

500 GB

750 GB

1000 GB

From the graph above, 750GB HDD is optimum amount.

Therefore, the best choice in case Sohel buys the laptop is to buy the laptop with 4 GB RAM and
750 GB HDD for Tk 62,000.
As Sohel was willing to pay Tk 65,000 for the laptop, his economic surplus is Tk (65,00062,000) or Tk 3,000.
The economic surplus was equal in both choices. But then Sohel decided to buy the camera. He
considered that the camera will earn him more cash and with that he can buy the laptop later. But
if he buys the laptop, although it will serve its purpose, no new cash will be available.
Discrepancies: Sohel did not consider the price of the accessories like memory card, filter etc
needed for the camera for which he ended up paying another Tk 5,000, making the cost of the
camera Tk 89,000. The amount is higher than the expected benefit.
But later, in the first six month, Sohel got a number of photography jobs and rented the camera,
too. He earned around Tk 25,000. Judging by this trend, it can be assumed, the final amount of
benefit from the camera will be much higher than the cost and the decision was correct indeed.