Opportunity cost
Response to Jordan
What a great discussion! Opportunity cost is the returns that a business would have received but passed it up to pursue another option. Opportunity cost is not only used in business but real life also. A person weighs in between two options and chooses a choice that they think would bring more returns than the other. An option can get selected because it brings the business more money or saves business time (Parkin, 2016). Opportunity costs make people good at decision making as they choose between two very close options.
References
Parkin, M. (2016). Opportunity cost: A reply. The Journal of Economic Education, https://doi.org/10.1080/00220485.2015.1106366.
Response to Lisa
Fantastic! Marginal production cost is the change in the total production cost that comes with producing an extra unit (Frischmann & Hogendorn, 2015). Companies need to calculate the marginal cost since it helps them achieve economies of scale, which is when they produce more goods with fewer input in prices. In this case, Peloton Interactive identified that they would make more profit if they changed to the cheaper version of their original treadmill. Therefore, it can comfortably produce more units, cheaply, since COVID 19 has increased the market, allowing people to exercise at home.
References
Frischmann, B. M., & Hogendorn, C. (2015). Retrospectives: The Marginal Cost Controversy. American Economic Association.
Reply to Professor
COVID 19 made several countries to put restrictions, locking their borders, and enforcing curfews on their citizens. People were encouraged to stay and work from home, and therefore the air travel was greatly affected (Suau-Sanchez, Voltes-Dorta, & Cugueró-Escofet, 2020). Airlines recorded significant losses from the restrictions. However, countries have begun easing their restrictions, allowing for air travel while still encouraging people to follow specific guidelines. COVID 19 has brought about a change in the demand-supply curve. The curve has shifted to the left. There is an increase in air ticket prices as airlines try to bring back profit and decrease the demand for air travel. People do not want to travel because the disease is still around. I believe that the cleaning protocols put in place by airlines do not boost passenger confidence since the disease gets contained through personal initiatives such as washing hands and wearing a mask.
References
Suau-Sanchez, P., Voltes-Dorta, A., & Cugueró-Escofet, N. (2020). An early assessment of the impact of COVID-19 on air transport: Just another crisis or the end of aviation as we know it? NCBI, https://doi.org/10.1016/j.jtrangeo.2020.102749.