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Frank Galilei Intro to Microeconomics Dr.

Stumph 20 April 2012 Time is Money Economics is defined in Chapter 1 as a study of allocation of scarce resources to meet unlimited human wants. Economics is a factor in every business decision across the world. The decision to hire additional workers for a particular business is a common but important action that occurs every day. Doing many landscaping jobs a year this is something that can make or break a job. My brother and I are efficient and experienced landscapers and try to do as many jobs by ourselves as possible. On average we mulch 3 yards of mulch every hour. If we hire another person it should go up by 1.5 yards of mulch every hour making the total 4.5 yards an hour. Right? When you do the math it makes sense, but hiring an additional worker may not be as good of a decision as it seems. When doing a landscaping job that consist of mulching, edging, and cleaning out the beds it is something that when done efficiently shouldnt take much more time of 1.5 yards per person per hour. At a job that consists of doing 12 yards of mulch it should take two people 4 hours and three people 2 hours and 40 minutes. If each person averages $10 dollars an hour and it takes it should cost $80 in labor. If the marginal product of labor increases by the same number every time then it never hurts to add an employee. The decision to hire another employee is based off the

total output put out by all the employees. If the total output is decreasing dramatically and the profits are not the same or within reason the extra employee hurt the company more than the help or labor he did. If we dont hire the extra employee the cost to the company is time we could be doing another job. In the case of an employee decreasing profits because the output is not increasing, the extra job would be money for the employee but not for the company. It would be a better business decision not to hire him. He would be considered a surplus to the company. The cost of the landscaping job is $240 for materials $80 for labor and profit of $180 for the company for a total of $500. This is the cost with two employees working 4 hours. If the third employee is hired and the job takes 3 hours, the extra cost to the company is $30. $30 may seem insignificant but if this happens every job the company is losing money and would have been better off not doing some of the jobs. They are working more for less. Comparing the decision of hiring the extra employee is not based off the output of each one. If the output is not effected the extra employee may be a waste or a bad business decision for the company. The economics behind this decision could make or break a company based off hiring one employee could affect if the company are doing more jobs to make the same amount of money they would have made having one less employee.