Economic Project Paper
Abstract
Firms experiencing or anticipating substantial workforce expansion face increasing pressure to accurately project the costs associated with human asset investments and potential future layoff requirements. With that in mind, the decision whether to take on temporary workers in lieu of hiring permanent employees is a decision that involves significant risk. However, real options theory offers managers the ability to consider irreversibility and to make workforce investment decisions under conditions of minimum uncertainty and maximum flexibility. We present real options theory within our organization analyzing both sides temporary and permanent hiring to yield maximum profit considering implicit and explicit factors and economic risks.
Introduction
The cost of production, inventory and sells means money expenses incurred by a firm on production of a commodity but in economics sum of explicit costs and implicit costs constitutes total cost of production of a commodity. We have seen that human are satisfied by way of goods and services which are sold by firms, respectfully. For selling a commodity, a firm requires factor inputs and non factor inputs. The money spent by the firm on both factor inputs and non factor inputs is called money cost. In economics money expenses alone do not provide a solid result in increased profits. As we examine the cost and benefit of selling our paper products in relation to increase stuff by way of temporary or permanent employment, we will look closer in detail later in this paper.

Economic Project Paper
Executive Summary
The case of whether our company should hire temporary workers or hire new workers to handle new demand for our product is relative to the price of our goods rendered. Managers, human resources, and business owners are constantly facing some of the most demanding situations due to challenging times of our economic society. No decision is an easy one to make however; these choices have to be made in order to maintain a steady flow of resources and incomes. The law of demand mentions the concepts which clearly clarify that quantity demanded increases when prices fall and quantity demanded decreases when prices rise to a degree. However, at some point in time management have a desire of knowing what the maximum price should be to render a product or service. Indeed, qualitative forecast serves to make some of the viable predictions as to whether certain circumstances are economic suitable, such as price, quantity whether they will change. Likewise, quantitative forecasts serves as a predictor given both direction and the scale is economic feasible. (Bakker, A. et al 2008)
The law of demand assumes the maximum quantity price is already set. The quantity demand does not always limit the amount purchased by the consumer. Therefore; when prices increase, the quantity demand decreases assuming other things do not change. Demand has some traits which can be considered as “non price determinants”. The relationship makes the assumption that when this occur things such as income and taste do not change then the quantity demanded and price has an inverse or negative outcome. If the price goes up, then the quantity demand goes down, and when price goes down the quantity demanded goes up. (Thomas, & Maurice, 2008)
Economic Project Paper
Let’s say our organization has decided to sponsor a store wide reduction on tissue. The terms of the agreements are such that customers who purchase tissue are entitled to 20% discount on their next purchase before a certain date The demand for the goods would produce a rocketing effect on quantity of sales in that department. However, to hire new or temporary help to accommodate the sales might or might not be such a good idea. Supply refers to those quantities of goods and services that are produced to meet consumer demand at a specific price at a given period. The law of supply show the relationship between quantities supplied and quantities the organization is willing to supply. Quantity should meet consumer demand at a specific period of time. Given the promotion was only held for a short- run, the tasks involved in the successful completion of the process could prove to be rather daunting. In the planning stages overstock of tissue was purchased to increase profits and purchase the tissue at a lower cost with the expectations that consumers will purchase additional items while shopping. (Thomas, & Maurice, 2008)
Factors or Cost
At some point costs are a relative issue for instance, taking into consideration whether or not the marginal costs are in line with the marginal benefits of leaning toward such endeavors. In order to understand marginal benefits these can be summed up to the total benefits caused by making a switch in the level of activities. The marginal cost of making changes is defined as the changes which has taken place in a set of variables. The sole purpose of the venture is to make a net profit from the change. The optimal benefit is to increase activity from the change and to somehow cause a positive effect in the workplace. (Bakker, A. et al 2008)

Economic Project Paper
In the case as to whether or not employers should hire temporary workers or hire new workers to handle new demand for our product should not be chained to decision makings wishing to maximize the net benefits of an activity. The opportunity costs of applying a viable resource is referred to as an incentive that management may deem necessary to carry out that resource. Mainly, the more inputs used the more the organization can capitalize on resources. Sunk costs which are costs that have been previously paid would be minimal. Typically, an organization only pays a small portion of monies to a temporary agent in the hopes of retrieving competent individuals who are gainfully employed for at least ninety days at a temporary status. The sole purpose of these employees is to gain permanent work as a part-time or full- time hire.
If you've ever thought that temporary workers cost less than full-time workers on a daily basis - think again. Studies show that it generally costs the same or just slightly less to hire temporary employees compared to bringing on a full-time worker. Essentially, when you use temporary workers, you're paying a premium to have help available when you need it. (Bakker, A. et al 2008)
The rate you pay temporary workers is composed of many elements. Vess Equity Group does not assume the costs or the responsibilities of providing and coordinating the benefits program for temporary employees. All your company has to do is pay the employment agency for the services used. The temporary agency, in turn, will pay the temporary workers' wages and benefits. (Bakker, A. et al 2008)

Economic Project Paper
While it's convenient not to have to deal with paperwork for temporary employees, you pay for that simplicity - part of the bill for a temporary worker goes to cover the temporary agency's administrative costs. The temporary employee receives only a portion of what you're charged for their services. The markup over wages paid to the temp worker depends on the assignment, job specialty; experience required workers compensation insurance, and any other special requirements stipulated by the company. Markups can range from as low as 25 percent to as high as 100 percent - or higher! For higher volumes of jobs involving lots of workers, agencies may discount their standard markup. In cases where a single, very specialized worker in high demand is needed, businesses can expect to pay a higher markup. Temporary agencies have to consider the workers compensation code classification and the volume of candidates to choose from in the available pool of potential candidates. (Bakker, A. et al 2008)
To get an idea of what you're paying for (besides the temporary worker's time), take a look at the administrative and human resource costs typically assumed by a temporary agency:
Skills testing
Reference verification
Payroll expenses and paperwork
All withholding taxes
Payroll taxes
Unemployment insurance
Workers' compensation insurance.
Some agencies also provide a range of benefits for their workers. The scope and size of the benefits package often depends on the level of work done, the demand for the type of work involved, and the employee's length of service. Some temporary agencies pay bonuses to good workers, ranging from cash to increased benefits, trips, and other awards. (Bakker, A. et al 2008)
If it seems as if you're paying a lot for temporary help, remember: the lowest prices do not always deliver the best workers. Besides price, the customer service capabilities of the temporary employment agencies in your market should be strongly considered. How they handle your orders, screen prospective workers for you, and provide feedback on each assignment will provide additional value to your company. It's also important to note how responsive the agency will be if an on-the-job problem arises. It's worth it to pay a little bit more to an agency that's well organized and always delivers the type of help you want.
Of course, the strongest factor to consider when deciding whether to pay for bringing in a temp is how much will your business suffer if the work goes undone or the position remains vacant? If the cost-benefit tradeoff is right, you should explore the temp option.
If you do decide to hire a temp, you can ensure the success of their efforts by bringing them on under a clear job description and with a clear direction for their management. Read How to Manage a Staff of Temporary Workers for additional ways to structure your temporary workforce for success.
When a particular phrase such as “more bang for your buck” is applied this generally means that a particular activity should yield the greatest marginal benefit for the dollar. Say the
Economic Project Paper organization is currently staffed with at least five employees during lunch hour. Recently, some of the workers had been calling in for personal reason, leaving only three remaining to accomplish all the work of five. During this time management has noticed a significant increase in productivity. Should management make any improvements when they begin to notice a trend in this type of activity? The implicit costs that management incurs are the slim marginal monetary opportunities of utilizing competent individuals from a reliable source from a network staff. The implicit costs are solely due to the organizations non monetary payments to utilize one’s own resources. The explicit cost includes the use of a secondary entity to supply the reliable resources necessary for the tasks. The opportunity costs of losing a few “slackers” due to personal hardships might mean that they will soon shape up only gives a hint to some of the opportunity costs involved in the hiring of temporary workers or new workers to handle new demand for our product. (Bakker, A. et al 2008)
Measurement
The text mentions several means to measure data on a statistical level. Therefore, in this case management forecast sales on a given day to determine the feasibility of whether or not hire of temporary workers or hire new workers could assist with demand of products. Expenditures such as organizations total sales play a major role in the decision making process. That being said, production and cost can be closely examined by any member of the management staff. Regression analysis is a statistical tool used by management which foretells information useful to make decisions that maximize profits greatly appreciated. (Bakker, A. et al 2008)

Economic Project Paper
An economy of scales in the paper products industry has experienced some unparallel challenges. In reference to long-run average costs which has continued to fall due in large to health and other related risks. Economies of scales results when a given increase in all inputs results in a more than proportional increase or output. (Bakker, A. et al 2008)
My assumptions are general and are such that some employees mainly those who experience the same type of working relationships are bored with the way management make preparations. When experiencing the demands of the working environment they become consumed with the tasks at hand. Emotional exhaustion and chronic fatigue are some of the viable symptoms in the working environment. Often suffering from burnout, employees find more and more reasons to call in sick (Bakker, A. et al 2008). Employees’ behavior is one of the main factors of job performance the ineffectiveness of which contribute to poor working conditions. Hiring excessive employees and temporary worker undermines the attitudes of permanent employees in making sound judgment decisions. When energy resources are diminished employees will not perform as well. Therefore, the results of which will cause sales to decrease over a period of time.
Generally, goods and services have some ways under which they can be substituted in an effort to obtain maximum benefits. Oftentimes the management is willing to embark on these trade- off or substitutions. However, factors involving the way the economy are responding to change has caused many organizations to mend their long-run planning techniques. One aspect of our economy is relative to market equilibrium and profit maximization. Commonly, members of management make the best decisions given the best actions of their neighbor’s efforts. For
Economic Project Paper example, our neighbor groceries do not offer our same type of choices in food services and is therefore not utilizing as many employees which serve and or benefit the consumer. Equilibrium occurs at the rate when given a price demanded because a decrease in the quantity demanded thus increasing the revenue for the organization. (Bakker, A. et al 2008)
Finally, should our company hire temporary workers to handle increase demand for our product? Is a question of whether or not demand is in line with supply? Whether or not the idea is good a bad managements decisions will need to be made. Generally, management bases these decisions of many factors. One of which is highly relative to the way the economy is going. Currently, the economy is not in the condition to hire a many new employees. These decisions weigh heavily on companies profits and the interest of the shareholders. The opportunity to incorporate the assistance of new worker and temporary workers, management should be able to deal with certain risks that may occur during the process. Furthermore, temporary employees are only hired for a given period of time and after that time period is up the employee is typically faced with seeking other avenues of employment.
Concluding all of the mentioned above it is important to say, that companies are highly interested in using temporary workers due to the possibility to increase their profit. They manage it through getting a large amount of work performed at a minimum cost. At the same moment there are still a lot of issues to discuss concerning temporary workers and especially the implicit and explicit cost they get from the companies that use them. There are certain disadvantages that temporary working brings to the U.S. economy: the growth of unemployment and job insecurity but on the other hand the usage of temporary workers may bring the growth of the profit margin and cash flow of the companies in particular and the increase of the income of the country in
Economic Project Paper general. With everything we do has positive and negative and or debits and credits, but here it is a collision the ethical aspect of the problem and the economical advantages. The best way out of this situation is to find a compromise, which lies in granting temporary workers more benefits and requiring a higher-level work from them.

Reference
Bakker, A., Van Emmerik, H., & Van Riet, P. (2008, July). How job demands, resources, and burnout predict objective performance: A constructive replication. Anxiety, Stress & Coping, 21(3), 309-324. Retrieved September 21, 2009, doi:10.1080/10615800801958637
Thomas, C. and Maurice, S. (2008). Managerial Economics (9th ed). New York: McGraw-Hill Irwin