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Opportunity Cost Case Study

Opportunity Cost Case Study

admin / December 30, 2018

The chosen Firm

The company of interest from the list of 500 companies is Days Inn hotels (Entrepreneur, 2011). The company of choice from among the list of 500 companies was based on the micro economic principle of opportunity cost, among other principles, as the decision variables in the typical hotel business environment.

Opportunity cost was employed as critical variables in identifying the drivers of consumer needs that the Days Inn hotels could satisfy to fulfill its business obligations and objectives to meet consumer needs and customer satisfaction in the hotel industry (Frank, 2005).

In addition to that, scarcity of services and products offered by the hotel industry in various markets, microeconomic issues such as consumer behavior and income level, efficient allocation of resources particularly investment capital, absolute advantage of the investment opportunities in the hotel industry, and the laws of demand and supply for the services and products offered by the hotel industry to consumers were other contributing variables.

From the consumer’s point of view, opportunity cost provided the explicit and implicit value of available opportunities to be exploited or foregone to settle for alternatives. These included an individual’s choices to call in at a hotel for meals or for boarding services.

Opportunity cost had an integral value in propelling the researcher to make the choice of company in terms of what should be produced to meet the needs of the specific market segment with all other market characteristics such as demographic and income distributions. The approach used to produce consumer products and consumer behavior in the typical market segment also contributed significantly (Frank, 2005).

Why the Interest

Not only does the exposure and research on the Days Inn hotels provide a basis for understanding the typical application of microeconomic principles, but adds value to the practical application of the principles that relate economic theories to practice. That is the case with Days Inn hotels, a product and services industry.

In addition to that, it helps in the enhancement and understanding of the economic rationale of undertaking a specific investment opportunity.

Application of the Principles

The application of microeconomic principles provides answers to the question on what is to be produced, how consumer products and services should be produced and tailored to meet customer needs and expectations, and the demographic distribution of consumers who are targeted for the specific hotel industry (Frank, 2005).

A variety of foods and beverages, besides the provision of boarding services are the products and services that have to be produced to satisfy the needs of customers who call in at the Days inn hotel.

One of the concepts integrated into the choice of company was the element of scarcity for the product and service offered by the Days Inn and hotels and industry to address the needs of customers across all demographic distributions. Scarcity was the driving force in allocating resources such as capital investments by converting existing buildings into providing hotel and Inn services.

Products and services should target consumer needs in the hotel industry. The production process should be based on consumer behavior as a microeconomic variable. Here consumer behavior and demographic trends influence the type of foods and boarding services to be offered, answering the question of, to whom the products and services should be produced (Frank, 2005).

The Days Inn hotels, therefore provides meals, boarding services, and other related services, based on the level of demand of such services to all people of different age groups as a demographic variable, a typical demonstration of theoretical and practical principles of economics (Frank, 2005).

References

Entrepreneur. (2011).2010 Franchise 500 Rankings. Retrieved March 18, 2011 from
http://www.entrepreneur.com/franchises/rankings/franchise500-115608/2010-1.html

Frank, R. H. (2005). The Opportunity Costs of Economics Education. The New York Times.
Retrieved March 17, 2011 from: http://www.nytimes.com/2005/09/01/business/01scene.html

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