Micro Economics Cost Benefit Analysis

1. For our assignment on the cost-benefit analysis of a situation, we have chosen to compute the cost of the fuel that our classmates, who live in Uttara, incur everyday whilst coming to IBA. And for the benefit calculation, we have considered the options that they have, per se other universities they could have attended instead of IBA, which are closer to their homes in Uttara.

The reason we have chosen this scenario for this Economics assignment is because it is one of the everyday economic activities that we engage ourselves into. Octane and petrol, the most common fuels that cars use for travel, is a resource that is ever-decreasing, non-replenishable in the short run, and getting costlier by the day. Yet a great quantity of it is being used by them every day since the distance from Uttara to IBA is quite literally double than that to private universities like NSU and IUB. The question is “why?”

By coming to IBA, these students are getting a lot of quite immeasurable benefits, the standout of which would be that they get an actual university campus. But there is one quantifiable benefit – the amount of the salary that these students would get in their first respective jobs compared to a similar candidate who has graduated from either IUB or NSU. The costs and benefits are stated in parts (2) and (3), respectively.

2. For the part of the fuel cost estimation, the following table has been prepared.

Fuel (litres) | Total Cost (Tk.) | Marginal Cost (Tk.) |

0 | 0 | 0 |

1 | 94 | 94 |

2 | 188 | 94 |

3 | 282 | 94 |

4 | 376 | 94 |

5 | 470 | 94 |

6 | 564 | 94 |

3. The average salary* of an IBA graduate on the candidate’s first job:

* Tk. 40,000

The average salary* of an NSU graduate on the candidate’s first job:

* Tk. 25,000

The average salary* of an IUB graduate on the candidate’s first job:

* Tk. 20,000

*All the benefits are computed on the following assumptions:

* The CGPA of all 3 candidates are equal.

*...