Economic Decisions: A Sea Of Problems.

A careful look at the world around us clearly demonstrates that we are surrounded by a sea of problems.

There does not seemto be any exactway of classifying them, simply because they are so diverse in complexity and "personality." One approach would be to arrange problems by their difficulty.

Simple Problems
Onthe lowerendof our classificationof problemsaresimplesituations.

   ·Should I pay cash or use my credit card?
   · Do I buy a semester parking pass or use the parking meters?
   ·Shall we replace a burned-out motor?
   · If we use three crates of an item a week, how many crates should we buy at a time?

These are pretty simple problems, and good solutions do not require much time or effort.

Intermediate Problems
At the middle level of complexity we find problems that are primarily economic.

   ·Shall I buy or lease my next car?
   ·Which equipment should be selected for a new assembly line?
   ·Which materials should be used as roofing, siding, and structural support for a new building?
   ·Shall I buy a 1- or 2-semester parking pass?
   · Which printing press should be purchased? A low-cost press requiring three operators, or a                     moreexpensive one needing only two operators?

Complex Problems
At theupperendofourclassificationsystemwediscoverproblemsthatareindeedcomplex.

Theyrepresentamixtureof economic,political,anqhumanistic elements.

   ·The decision of Mercedes-Benz to build an automobile assemblyplant in Thscaloosa, Alabama, illustrates a complex problem. Beside the economic aspects, Mercedes-Benz had to consider possible reactions in the American auto industry.Would the German government pass legislationto prevent the overseasplant?What about German labor unions?
   ·The selection of a girlfriend or a boyfriend (who may later become a spouse) is obviously complex. Economic analysis can be of little or no help.
   ·The annual budget of a corporation is an allocation of resources, but the budget process is heavily influenced by noneconomic forces such as power struggles, geographical balancing, and impact on individuals, programs, and profits. For multinational corporations there are even national interests to be considered.


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