(A)Principles of increasing/diminishing marginal returns.
Principles of economics include returns to scale. Most firms experience increasing returns to scale when at the beginning of the business the costs in the long-run are decreasing this is so because a unit of the available resources produces more returns. On the other hand decreasing returns to scale in most cases occurs when the unit resources produce fewer returns. Organic products on the article exhibit increasing returns to scale, (Arthur, 2003). From the article companies such as wall-mart improved and became big firms this helped them to scale up, and make high profits. The USDA 0rganic led to an increase in the economies of scale, more products were involved in the market. This included breakfast cereals to chicken breasts. The article shows the growth of yields in 200% as compared to yields 70 years ago. The chicken in the farms grew by 25% bigger in a very short time, furthermore during this time they used very little food. This shows that there existed increasing returns to scale, (The Organic Myth). The organic foods enjoyed the large scale production, marketing of the food made it easier to sell the products. Also the large scale production provided room for improvement.
(B)Scarcity, Opportunity cost cost/benefit.
Scarcity in economics is a fundamental problem that elaborates on the issue of unlimited wants human needs and resources. The company is not in a position to satisfy the customers’ requirements, (Mankiw, 2008). This implies that society goals will not be perused to its fullest at the required time frame. On the organic food article most of the products were scarce. In the article the Hirschberg’s dilemma is that the customers did not attain food that nourished their social conscience. Finding organic ingredients became very difficult. This was brought up by the issue of scarcity of organic cows in USA to go around. The ingredients became a threat were sold into the countries that sold the best organic yogurt. Scarcity of the organic ingredients made industries to look for fields to as far as Siera leone, China and Brazil.
Opportunity cost refers to the cost that is related to a choice that is second available to an individual who has chosen among many mutually exclusive options. It becomes a key concept when dealing with scarcity and choice. On the article opportunity cost is clearly illustrated. Edwards of Westfield decided to halve his number of cows to only 25 cows so as to get more organic milk. The cost foregone was the 25 cows that were reduced for the sake of increasing yield,(The Organic Myth).
(C) Supply and demand analysis.
Demand and supply important factors in economics .In a market mechanism scenario the forces of demand and supply determines the price and quantity of the products of the organic dairy products. When the supply is at its lowest the demand of the product increases. The shortage in the supply of food led to an increase in demand.Stonyfield faced supply crunch hence cutting the percentages of organic products in his sector,(The Organic Myth)
(D)Marginal cost & Efficiency.
Money benefits are observed in the paper the market diversified hence making a lot of profit. Economic efficiency in most cases is demonstrated when the resources available are used well so as to maximize production of goods. The cows have been used to increase production. The chickens too clearly show the existence of economic efficiency .It developed and grew after utilizing very little food.
(E) Rational choice.
This refers to a scenario in which the customer is always right on what they choose in the market. It is believed that the consumer chose’s rationally on his goods and services. They try to maximize their benefits and work on the minimization of costs, (Arthur, 2003). In the article on the organic food the consumers dictated what they wanted. Hence Herzberg and other companies worked towards the demand of the customer.
Arthur, S. (2003).Economics: Principles in Action. New Jersey: Pearson.
Mankiw, G. (2008).Principles of Marketing.Boston: John Wiley & Sons.
The Organic Myth: Pastoral Ideals are Getting Trampled as Organic Food goes Mass Market Retrieved on October 16, 2006 from http://www.businessweek.com/magazine/content/06_42/b4005001.htm