Discussion – no more than 350 words
Small mistakes are the stepping stones to large failures. How might this saying apply to the theory of marginal analysis (discussed in Chapters 1 & 2 of your textbook)? In your responses, provide an example of a seemingly small mistake with large consequences.
Jeffrey
Discussion #1 Answer no more than 200 words
Hi Class,
Hope everyone had a great weekend! The saying “small mistakes are the stepping stones to large failures” really makes sense when you think about marginal analysis, which we learned about in Chapters 1 and 2. Marginal analysis is all about weighing the extra cost and extra benefit of doing just a little more or a little less of something. Since it focuses on small, step-by-step decisions, even tiny mistakes can add up and lead to much bigger problems over time.
A greater example is what happened with All Nippon Airways in April. Because of a currency conversion error on their Vietnamese website, some first class and business class tickets were listed for a few hundred dollars instead of the usual several thousand. One person reportedly bought over $250K worth of flights for just $17K. This small mistake in their pricing system could have cost the airline millions.
Looking at this through marginal analysis, the airline failed to properly compare the cost of offering those high-end seats to the money they were making from them. A small technical mistake made the whole system misjudge the value of each seat. It might have seemed like a minor error in the moment, but when it was repeated across many ticket sales, the consequences were huge.
This example shows that even small errors in how we think about costs and benefits can spiral out of control if we’re not careful. Whether it’s in business or in our personal lives, taking the time to make thoughtful decisions using marginal analysis can help us avoid turning small problems into big ones. Every choice matters, even the little ones.
Jenny
Discussion #2
Discussion #1 Answer no more than 200 words
Hello everyone,
As the phrase “small mistakes are the stepping stones to large failures” suggests, marginal analysis plays an important role in economics and decision-making. The concept of marginal analysis evaluates the effect of small changes on the performance of an organization. (Mankiw, 2020) By balancing marginal costs against marginal benefits, firms can determine the optimal level of production or investment.
The short-term appearance of a seemingly innocuous decision, such as slightly underpricing a product to remain competitive, may be misleading. As a result of these small, consistent losses, the business will experience significant losses if this pricing strategy does not cover marginal costs. Over time, these small, consistent losses can cause significant losses, even leading to business failure. As a result of marginal misjudgments, a company may hire more people than necessary, underutilize resources, or produce less efficiently, giving rise to larger strategic problems (Investopedia, 2023)
Blockbuster, for example, failed to invest early in digital streaming, leading to its collapse as Netflix and other competitors tapped into consumer demand, leading to its collapse over time. By ignoring innovation’s marginal benefits, you can run the risk of ignoring them.It is essential that marginal analysis is used consistently to guide incremental decisions in pricing, hiring, marketing, and production. Failure to do so may result in major operational and financial problems.
