This is a choice a consumer may have when dining at a local restaurant. It also represents a deeper meaning when approached using the principles of economics. Three key economic principles that can be used in decisions people make concerning their time and money are people are rational, they respond to economic incentives, and optimal decisions are made at the margin (Hubbard & O’Brien, 2010).
We face economic decisions every day; some may be trivial like the choice between lobster and chicken, and others more seismic in impact on our future. I will explore an economic decision I am currently facing which allows me to examine the marginal costs and benefits, opportunity costs, and possible incentives that could alter my decision. I recently moved to Minneapolis for a fresh start from the doldrums of the Michigan economy. Since April, I have been searching for a job.
What started as hope for an immediate career opportunity had slowly diminished to “I just need a job! ” After months of submitting my resume to lofty positions, I found myself grounded without a bachelor’s degree and running out of money. I was offered, and accepted, a position at Caribou Coffee for $8. 00 per hour. A humbling endeavor, but an endeavor nonetheless. I continued to submit my resume between making lattes and doing homework. I received a call from a recruitment firm for the Target Corporation that had my resume.
They informed me that Target wants to interview me for the position of Merchandise Remodel Coordinator that pays $11. 50 per hour at their corporate headquarters in downtown Minneapolis. This would be a contract position through January 2011. I have already been offered a store management position with Caribou after three weeks of employment. The constant in this scenario is that I want to work for a global retail company. The decision is this: If offered, do I take the Target position or do I stay with Caribou and entertain their management offer?
To weigh this decision, I must examine the marginal costs and benefits as they apply to my personal life. First, the marginal costs of taking the Target position are as follows: I will have to quit Caribou and sacrifice the opportunity of store management or higher, I will expose myself to possible unemployment in six months, and my commute will increase creating more cost in fuel and downtown parking. The marginal benefits are: I will have my “foot in the door” at Target Headquarters. The pay is more than Caribou.
Six months at Target is better than six months at Caribou on my resume. The hours will be steady and consistent. I will have potential for advancement and permanent employ contingent on my performance, and it will provide a much better learning experience. Although this position at Target is nowhere near the salary bracket I had hoped, I have decided to move forward with the interview and accept the position if offered. In my opinion, the marginal benefits outweigh the marginal costs in this particular situation.
The opportunity cost, or sacrifice as I mentioned earlier, will be the management offer from Caribou and any other offers that may surface in the near future. This trade-off works in my benefit although it isn’t an optimal decision. The only incentive that may have altered my decision would be if Caribou offered me a position in their corporate office with a salary and benefits. This decision, in its foundation, is simply an example of many that people make daily.
The principles of economics I used to make my decision are found globally, locally, and personally in all aspects of commerce. Knowing that the supply of quality corporate positions is very low and the demand for these jobs is very high, I rationally used a marginal analysis to weigh the costs and benefits, I explored possible incentives, and made my decision at the margin. As a result, I hope the outcome of this decision may lead to my reply…”I will have the lobster. ”