Economic Analysis

Possibilities: Economic Analysis 1


In 3–4 pages, graph a set of data and analyze the results. Analyze the concepts of opportunity cost, marginal cost, and marginal benefit in real world situations.

Business leaders must be able to analyze and interpret economic information in order to make sound economic decisions. Businesses require guidelines and solutions with support from relevant data, resources, references, and economic principle.



The term, economics comes from the ancient Greek words oikos, which means “house,” and nomos, which means “custom” or “law.” The term means, basically, “household management.” It has taken on a much broader connotation in the last few centuries, however. Today, it means the study of households, consumers, businesses, and even nations. In its broadest sense, economics is the study of how to fill unlimited wants with limited resources.

The two most modern forms of economic activity—the free market and the command economy—each have advantages and disadvantages. Consider how scarce business and household resources are allocated, as well as how consumers decide what to consume, how much to consume now, and how much to consume later.

Questions to Consider

As you prepare to complete this Economic Analysis assessment, you may want to think about other related issues to deepen your understanding or broaden your viewpoint. You are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of your professional community. Note that these questions are for your own development and exploration and do not need to be completed or submitted as part of your assessment.

  • What models do economists use to examine economic behavior and the economy?
  • What is the purpose of a possibilities curve?

Economic Analysis Resources

Suggested Resources

The resources provided here are optional and support the assessment. They provide helpful information about the topics. You may use other resources of your choice to prepare for this assessment; however, you will need to ensure that they are appropriate, credible, and valid. The MBA-FP6008 – Global Economic Environment Library Guide can help direct your research. The Supplemental Resources and Research Resources, both linked from the left navigation menu in your courseroom, provide additional resources to help support you.

Theory and Principles of Economics

The resources below contain a number of economics theories and principles.

  • What Is Economics?| Transcript.
  • Economics Terminology| Transcript.
  • The Environmental Literacy Council. (2015). Marginal costs and benefits. Retrieved from
  • McConnell, C., Flynn, S., & Brue, S. (2015). Macroeconomics(20th ed.). New York, NY: McGraw-Hill Education. Available from the bookstore.
    • Chapter 1, “Limits, Alternatives, and Choices,” pages 4–21 and 24–28.
    • Chapter 2, “The Market System and the Circular Flow,” pages 31–49.
    • Chapter 3, “Demand, Supply, and Market Equilibrium,” pages 53–72 and 75–80.
  • Economic Analysis Assessment Instructions


This assessment has three parts. Be sure to complete all three parts before submitting.

Part 1

Below is a production possibilities table for consumer goods (butter) and capital goods (guns).

Production Possibilities
Type of Production Production Alternative A Production Alternative B Production Alternative C Production Alternative D Production Alternative E Production Alternative F Production Alternative G
Butter 0 1 2 3 4 5 6
Guns 14 13 11 9 7 4 0

Graph the data provided in the table using Excel. (Hints: Type your data into an Excel spreadsheet. With your mouse, highlight the data only. Go to insert. Click on scatter. Click on smooth lines chart. Select the line chart. Plot data drawing line.)

Once you have graphed the data, please copy and paste your graph into a Word document so you can complete the rest of the assessment.

Based on the graph you created, complete the following:

  • Analyze the graphed data to develop assumptions, referencing the possibility curve.
    • Identify the specific assumptions that underlie the production possibilities curve.
    • Determine the cost of more butter, if the economy is at point C.
      • What would be the cost of producing more guns?
      • How does the shape of the production possibilities curve reflect the law of increasing opportunity costs?
    • Suppose this hypothetical economy were producing only 1 item of butter and 10 guns, and this was depicted by this production possibilities table and curve. What conclusions could you draw about this economy’s resource utilization?
    • Determine whether this economy is able to produce outside its current production possibilities. How might technological changes affect the production possibilities curve? How can international trade allow consumption above its production possibilities curve?

Part 2

  • Analyze the concept of opportunity cost.
    • Explain what is meant by opportunity cost.
    • Explain how opportunity cost relates to the definition of economics.
    • Determine if allocating advertising expenditures to boost sales or investing in a new plant and equipment would entail the greater opportunity cost. Explain and support your response.

Part 3

  • Apply the concept of marginal cost and marginal benefit to real world decisions.
    • Provide two examples of recent decisions you made in which you, either explicitly or implicitly, weighed marginal cost and marginal benefit.

Additional Economic Analysis Requirements

  • Include a title page and reference page.
  • Number of pages: 3–4, not including title page and reference page.
  • Number of resources:At least 2.
  • APA format for citations and references.
  • Font and spacing:Times New Roman, 12 point; double-spaced.