Opportunity Costs

In the contemporary society, universities and middle level colleges are being viewed as key drivers of economic growth and development. Success stories of various economies i.e. the Silicon Valley together with increased recognition of knowledge based economies are some of the factors that have driven the aforementioned trend. Moreover, policy makers who are responsible in the formulation and implementation of policies in third world and emerging economies share a common school of thought that incorporating graduates from colleges at major institutions is an ultimate way of containing or else curing economic ills. Indeed, it is undeniable that human capital is the strongest indicator of sustained economic growth and development. According to Rittenberg and Tregarthen (2008), high amounts of human capital are largely intertwined to relative increase in population and growth in employment levels, increase in wages and salaries and innovation. Moreover, high levels of college graduates increases human capital which otherwise trigger reinvention in an economy and enhances economic growth in both the long and short run. Colleges play a cardinal role in raising the levels of human capital in any economy. The aforementioned can be done by colleges by increasing the supply levels of human capital i.e. by enhancing the production of laborers or employees who are skilled. Fully baked graduates from these colleges tend to raise the levels of human capital in an economy. However, this is possible only if these newly baked graduates stay in a given locality and join the labor market. On the other hand, graduates are often very mobile individuals. Therefore, it is evident that it is not always the case that areas whose graduate production is high will experience high levels of human capital relatively because of the dynamic forces of the labor market.

On some isolated occasions, the production possibility curve of a nation can shift inwardly. This aforementioned is often witnessed when the production capacity of an economy declines. There are a number of scenarios that can shift the production curve of a nation inwards. First, the rare development often comes to play if there is a decline in either the quality or quantity of the labor force. Secondly, if there is a decline in either the quantity or quality of an economy capital. Finally, the development can be witnessed when an economy utilizes low technological levels in its production purposes. A good number of European economies have witnessed a relative decline in their population. In the United States of America, birth rates are falling at an alarming rate over the past two decades and were it not for the immigrants who stream in their millions productivity of the state could have been jeopardized. When a state is at war or is experiencing rough financial times capital stocks are often affected i.e. they fall. Economies depend on capital stock to boost their investment levels and enhance general growth and development. However, during economic crisis, an economy is not well positioned or else affords additional investments (Frank, 2005). This implies that it will utilize a technology that is otherwise less productive for its production purposes. For example, given an economy is unable to attract new investment or afford one, it will be forced to utilize old machines i.e. computers or acquire same old technology from other economies relatively because it has no financial muscle to acquire new machines. Indeed, developed economies often export obsolete technologies and other machinery to third world countries and other economies who cannot afford modern gadgets (Rittenberg & Tregarthen, 2008).

Consumption and investment are largely intertwined. Therefore, an increase in is triggered by reduced consumption and vice versa. An economy that foregoes consumption for investment purposes often stays ahead of its competitors. According to Frank (2005), increased levels of investment often trigger economic growth and development of a nation in both the short and long run. The economy of the United States is well placed to accrue more benefits if more of its policies are aimed at containing the levels of consumptions and increasing those of investment. This is relatively because the population will be able to earn additional incomes due to enhanced economic growth. However, during the transition period i.e. from consumption to investment, a number of workers and the owners of the means of production in the consumption industries will harness low levels of income. On the other hand, workers and those who own the means of production in the investment industries or sectors are better placed to get higher levels of income. However, despite this painful capsule of transition, reductions of consumption spending are paramount if the United States of America is keen on increasing its spending. There are two common types of consumption, private and government spending. Private spending entails domestic or household spending i.e. the use of income to meet basic needs i.e. food, shelter and clothing. When households reduce their levels of consumption, additional income can be utilized in private spending. That is the populace are able to purchase housing and other investments. On the other hand, government consumptions is a kind of spending that entails payment of workers who are responsible for administering state programs.  The United States is able to cut down recurrent expenditure and increase its investment levels i.e. by allocating more funds to infrastructure and acquisition of military gadgets. According to Rittenberg and Tregarthen (2008), the opportunity cost of investment can be said to be the reduced levels of consumption that often results from the redirection or diversion of state resources towards investment.  

Technological changes have played a cardinal role in enhancing productivity and profitability of firms by relatively bringing down costs. Technology has been accredited for enhancing the efficiency of operations of companies. In addition, technology often facilitates measures that seek to reduce costs related to production. In the past two decades, technological changes have significantly transformed the traditional systems of production. The aforementioned move has accrued a lot of benefits to both producers and consumers. To producers, they are able to produce large quantities of commodities at cheaper costs. This is relatively because of reduced hours of production. From the aforementioned, it is apparent that technological change and increased levels of production are intertwined. Increased levels of production imply that a lot of goods are made available in the market. In addition, there are minimal wastes in the production process. When a firm is able to increase its production by relatively reducing its costs, it is able to boost its profitability by harnessing additional revenues from their sale. On the other hand, consumers are able to enjoy quality products. Technological change shifted the production curve of the United States of America outwards. This is relatively because it is responsible for its rapid economic growth and development (Rittenberg & Tregarthen, 2008).

References

Frank, R. (2005, September 1). The Opportunity Cost of Economics Education. New York. Retrieved December 18, 2012, from http://www.nytimes.com/2005/09/01/business/01scene.html?_r=0

Rittenberg, L., & Tregarthen, T. (2008). Principles of Microeconomics. New York: Flat World Knowledge.