Economic Considerations

Economists look for the most cost-effective solution for the company. Their goal is for the company to make money so they try to keep the company's profits greater than its losses. Doing a cost/benefit analysis is a time-consuming process where you need to assign a dollar value to all the pros and cons of each alternative solution and then compare these dollar values with each other. Companies generally don't do a cost/ benefit analysis on every possible alternative solution. First they try to get a sense of the relative expense of the different options. Basically, you just want to answer the questions: Is this alternative solution going to be expensive? And/or, is it going to provide a profit for the company or reduce any of its costs?

Some general assumptions to keep in mind when thinking about the economics:

- you are charged by the hour for lawyers, so the longer they work on your case the more expensive the legal fees.

- public image has an effect on your stock price, so the better your company's image, hopefully, the higher your stock will be.

- buying more raw materials is less expensive than buying and installing new equipment in the short term, but the cost of these materials eventually adds up in the long run.

- buying new equipment is expensive, but it is a one-time cost.