Monday, December 27, 2010

"Marginal" Thoughts

Today's issue of The Wall Street Journal has a keeper (subscriber content at this writing, but put the headline in your browser and you might find an ungated version). it contains a very good article that can be used when discussing marginal productivity of labor and marginal revenue product. It really is worth the effort to try and find it. The slideshow is "okay" but doesn't have the potential of the article.

The is about how the venerable fast-food chain is adding things to its menu to appeal to changing customer tastes. The problem is some of the investments are hefty and the additional revenue generate may not pay for the investment. In the article, one franchiser talks about how a certain piece of equipment wasn't paying for itself. Another franchiser discusses how an attempt to stay open 24 hours at a certain location didn't cover the labor costs.

At the same time, the article discusses how new ideas can drive productivity - a key aspect for profitability in the fast food business. The most obvious example is the addition of a second drive-thru lane at some restaurants.

As I said, you might want to spend some time trying to find this article. It has real potential to help when discussing those "exciting" cost curves in your micro classes. As always, I look forward to your comments.

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