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Assignment3 economics - Essay Example

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Consumer Price Index (CPI) is defined as the average price of consumer goods and services being purchased by households. In the computation of CPI, a representative basket of goods is selected which represents the most commonly purchased items by consumers…
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Download file to see previous pages When computed on an annual basis, CPI is seen to rise 4.8% during the entire year. Because of these developments in the economy, it is expected that the price of supplies and other miscellaneous expense incurred by the business organization also rises in accordance to the CPI. However, as the CPI measures only a common basket of commodity, the rise in expenditures might be bigger or smaller than CPI. Thus, the company's expenses in these goods can affect bottom line especially if prices are of our merchandise are held constant. It is therefore recommended that per unit price of merchandise increased in order to keep up with the rising expenditures. If not, net profit will fall and the company might be recording losses in the near future. The increase in the general price level is detrimental to the organization if unmatched by subsequent hike in our merchandise prices.
Unemployment rate represents the percentage of unemployed individuals in an economy compared to the total labor force. In order to understand this term, it is essential to define the workforce. The entire labor force is consists of individuals from 16 years old and below retirement age who are actively looking for a job or employed. On the other hand, unemployed are those who are in the age bracket who are looking for a job in the past four weeks or those who had been laid-off (Bureau of Labor Statistics 2008).
During the past month, unemployment have declined by .3% meaning that there are less people who are looking for a job. The decline in unemployment undoubtedly means increase in the employment rate. When the number of people looking for a job declines, it often means that it is much harder to find individuals who will fill up the positions in our offices. In order for us to be able to gain applicants, I strongly suggest that we review our benefits and compensation packages in order for use to attract the best potential employees. Rising monetary rewards can be enticing to applicants. However, we should also take note of non-monetary compensation like recognition, work environment, and communication processes which are also considered by individuals who are looking for a job.
Employment Cost Index indicates the rise of fall of the cost of employment in the economy. This is a highly watched economic variable as it typically gives business organizations an idea of how they should tailor their employees' salaries and other paid benefits according to how the whole economy is behaving (Bureau of Labor Statistics 2008).
The government reports that the ECI increases by .8% from March to April thus representing an increase in employment cost. It means that generally, employers are paying their employees .8% higher monthly or 9.6% annually. In order to keep up with this development, our company should also increase our employees' compensation together with other paid benefits in order to reduce the risk of employee turnover. This often happens when employees are not well compensated and there are opportunities in the market which offers them more benefits. However, this will affecting our bottom line as it will irrefutably increase expenditures that we shoulder. Thus, it is recommended that we also increase the price of our products and services in order to maintain our profitability.
Productivity refers to the resources generated by the company's resources, per unit of input. A business ...Download file to see next pagesRead More
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