Tag: Principles of Marketing

The term profit has distinct meaning for different people, such as businessmen, accountants, policymakers, workers and economists. Profit simply means a positive gain generated from business operations or investment after subtracting all expenses or costs.

In economic terms profit is defined as a reward received by an entrepreneur by combining all the factors of production to serve the need of individuals in the economy faced with uncertainties. In a layman language, profit refers to an income that flow to investor. In accountancy, profit implies excess of revenue over all paid-out costs. Profit in economics is termed as a pure profit or economic profit or just profit.

Profit differs from the return in three respects namely:

1. Profit is a residual income, while return is total revenue.
2. Profits may be negative, whereas returns, such as wages and interest are always positive.
3. Profits have greater fluctuations than returns.

 

1. Risk-Bearing Theory of Profit:

The main proponent of this theory is Prof. Hawley. According to Hawley, one of the major functions of an entrepreneur is to bear risk that is associated first with the setting up of the business and then with the management of the business.

The risks in a business are of two types:

(i) Risk involved in the selection of the field of business; and

(ii) Risk associated with the management of the business.

After investing capital in a particular busi­ness, the entrepreneur has to wait for a long time before he can know if his selection of the field of business has been appropriate this long wait is a form of risk-bearing.

Again, while managing the business, the entrepreneur has to bear all the risks arising out of unexpected changes in the demand and supply for the product.

There may be sudden changes in the demand for a good owing to changes in the tastes, habits and incomes of the buyers, changes in the availability and prices of the substitute products, etc.

Also, there may be unexpected changes in the supply of the good owing to changes in the availability of the factors of produc­tion and changes in production techniques, etc.

Therefore, that the entrepreneur has to bear the risks associated with the unexpected changes in demand and supply of the product and also the risks associated with the consequent changes in the price of the product, total revenue and profit of the firm. The greater the ability of the entrepreneur to bear all these risks, the higher would be his level of profit. This is the main contention of the risk-bearing theory.

Critical Evaluation of the Theory:

The arguments that may be advanced in favour of the theory are:

(i) The theory attracts our attention to the fact that one of the main functions of the entrepre­neurs is to bear the risks.

(ii) The theory focuses also on the fact that a very few persons come forward to play the role of entrepreneurs because here they would have to bear the risks. That is why the supply of entrepreneurial services is very limited.

Arguments Against the Theory:

Let us now come to the arguments against the theory. These are:

(i) Risk-bearing is not the only function of an entrepreneur who has to perform many vital functions. For example, the entrepreneur has to innovate at regular intervals new products, new markets and improved methods of production and business.

He may augment his revenue and reduce his expenditures through such innovations and, consequently, his profit level would go up. Therefore, profit may also be considered as a reward for effecting innovations. Again, the entrepreneurs, all of them, have not the same ability to face risks and to perform other activi­ties.

Therefore, owing to differences in such ability, some entrepreneurs may earn rent of abil­ity. Similarly, if the entrepreneur is able to establish a monopolistic dominance in the market, then also his income, i.e., profit, would include the added income acquired through monopoly power. Therefore, profit cannot be explained only as a reward for risk-bearing.

(ii) The entrepreneur has surely to bear risks and his profit, at least some part of it, may be considered to be a reward for risk-bearing. However, risk is a subjective concept. We cannot measure risk in an objective, cardinal manner. That is why it is not possible to establish a functional relationship between risk and profit.

(iii) The exponents of the risk-bearing theory of profit did not distinguish between insurable risk and non-insurable risk. But if we are to obtain a good estimate of the amount of risk- bearing, it is essential to remember this distinction. For, the entrepreneurs actually do not bear the burden of insurable risks, it is borne by the insurance companies.

Therefore, they cannot be considered as risks. According to Prof. Knight, the entrepreneurs bear the burden of non-insurable risks and he has called these non-insurable risks by the name of uncertainty. The entrepreneur should obtain profit as a reward for bearing this uncertainty.

2. Uncertainty-Bearing Theory of Profit:

Prof. F. H. Knight (1885-1973) has developed the uncertainty-bearing theory of profit. He says that we may distinguish between insurable risks and non-insurable risks. This distinction is important. For, the entrepreneurs actually do not bear the burden of insurable risks it is borne by the insurance companies. Therefore, they cannot be considered as risks for the entrepreneurs.

For example, we know from experience that factory premises are exposed to the risk of fire. We also know why there may be fire in a factory premise, and so, we may adopt necessary measures for prevention of fire.

In spite of all this, there remains the risk of fire, and, once the insurance companies agree to bear this risk, it no longer remains a risk. In other words, according to Knight, insurable risks should not be considered as risks and there is no question of the entrepreneurs bearing this risk.

However, the entrepreneurs bear the burden of non-insurable risks for there is no insurance company to bear these risks on their behalf. Prof. Knight has called these risks the uncertainties.

He tells us that the entrepreneur should get profit as a reward for bearing the uncertainties of the business world. The more prudently an entrepreneur bears the uncertainties, the more should be the amount of profit to reward him with.

Critical Evaluation of the Theory:

The following arguments are advanced in favour of the uncertainty-bearing theory of profit:

(i) The theory attracts our attention to the fact that not all types of risk are to be borne by the entrepreneur. He actually bears the non-insurable risks. The insurable risks are taken care of by the insurance agencies.

(ii) The theory tells us that, like all other productive services, uncertainty-bearing is also a productive service. The entrepreneur supplies this productive service and profit is the price of this service.

(iii) Since, in general, people are averse to uncertainty-bearing, the supply of entrepreneurs in the real world is very small. This impression is also obtained from the theory.

Arguments Against the Theory:

The following arguments are advanced against the theory:

(i) Uncertainty-bearing is not the only function of an entrepreneur. The innovation of new products, new markets or new production and business techniques are also among the main tasks of an entrepreneur.

Therefore, along with the function of uncertainty-bearing, that of innovation may also be the source of profit. Again, the rent of ability and monopolistic dominance may also be the sources of profit. Similarly, a firm may earn profit owing to its goodwill in the market. Therefore, we cannot say that profit arises only as a reward for uncertainty-bearing.

(ii) Uncertainty is something subjective: It has no objective, cardinal measure. In the case of organisation and management of a particular business, different entrepreneurs may have different perceptions of the degree of uncertainty involved. Therefore, it is almost impossible to build up a functional relation between uncertainty and profit.

3. Rent Theory of Profit:

An American economist, Francis A. Walker (1840-97), is the exponent of the rent theory of profit. Walker says that an entrepreneur acquires profit because of his ability to perform. Walker argues like this. In a certain production process, if an entrepreneur uses land, labour and capital owned by his own self, then the residual part of his revenue, after payment is made to all these factors of production, is profit.

Now, at any particular price of the product, some entrepreneurs may have this profit equal to zero. They are called the marginal entrepreneurs. Any such mar­ginal entrepreneur can have nothing in excess of the wage, interest and rent earned by his own labour, capital and land.

Therefore, if an entrepreneur’s ability to perform is more than that of a marginal entrepreneur, then his cost of production would be smaller, and he would be able to earn a positive profit. In fact, the greater the efficiency of a particular entrepreneur than that of a marginal entrepreneur, the more would be the amount of profit earned by him.

There is some similarity between profit and rent. For, in the Ricardian theory of rent also, we have seen that rent is zero on marginal land and the less the cost of production and more the productivity on a plot of land, the more would be the rent enjoyed by its owners. Because of this similarity between profit and rent, Walker’s theory is called the rent theory of profit.

Critical Evaluation of the Theory:

Like the other theories of profit, Walker’s theory cannot satisfactorily explain as to why the firm and its entrepreneur should get profit. However, the theory attracts our attention to the similarity between profit and rent. But we should remember that rent is not the only element of profit.

Walker has argued that profit of the marginal entrepreneur is zero and the profits earned by an intra-marginal entrepreneur are all rent.

This contention of Walker may be correct if:

(i) An entrepreneur may supply his services only in his present business and he has no alternative employment to go to; and

(ii) The supply of entrepreneurial services or the number of entrepre­neurs is completely fixed.

However, in the real world, we always see that the entrepreneurs can supply their services to many alternative areas and from the point of view of a particular business, supply of entrepre­neurial services is not completely fixed—the supply can increase if the reward increases. There­fore, in any particular business, the minimum supply price of entrepreneurial services is not zero.

Loosely speaking, the minimum supply price of an entrepreneur in his present business would be equal to the maximum amount of reward that he may avail of in an alternative field of engagement, other things (i.e., risk or harassment factors) remaining the same. The minimum supply price of the entrepreneur’s services in his present engagement is called his normal profit.

If an entrepreneur is able to earn profits in excess of his normal profit, then this excess is a surplus and this surplus is called pure or economic profit. The amount of pure profit an entre­preneur may earn would depend upon the efficiency of his performance.

The more his effi­ciency, the more he would be able to earn as pure profit. Therefore, pure profit which is the excess over normal profit, is of the nature of the rent of ability. However, we have to remember here that the profit of a firm also includes what is known as windfall or chance income.

There­fore, the pure profit is a surplus which includes the rental surplus as also the surplus due to the windfall or chance factors. Therefore, pure profit is a mixed surplus.

4. Innovation Theory of Profit:

The innovation theory of profit was developed by Prof. Joseph A. Schumpeter (1883-1950). According to Schumpeter, the main function of an entrepreneur is to innovate. Here we have to remember first the distinction which Schumpeter had made between invention and innovation.

Invention is the discovery of a law of nature by a scientist. On the other hand, if an entrepre­neur manufactures a new product or introduces a new production technique by using the newly discovered law of nature, and thereby makes the commercial use of the invention possible, then this is called innovation.

For example, the scientists have discovered or invented the laws of science that are behind the manufacture of the goods like electric lights or fans, radio sets, television sets, refrigerators and such other goods. But the entrepreneurs have innovated these goods. Innovation is the commercial use of the laws of science that have been discovered by the scientists.

Schumpeter has said that if the entrepreneur can innovate new techniques of production and sale, if he can innovate a new product or a new model of an old product and if he can find new markets for selling the product, then Only, he will be able to play the role of a pioneer in the business world and increase the amount of profit. We may call this increase in profit the innovation-induced profit.

Criticisms of the Theory:

Schumpeter’s innovation theory of profit has explained nicely how an entrepreneur may increase the amount of profit by means of innovations. But this theory cannot fully explain why profit arises or why the entrepreneurs should earn profit.

For example, we know that an entre­preneur should obtain profit as a reward for bearing risk or uncertainty, for his ability to estab­lish monopolistic dominance, and for many other reasons. But Schumpeter did not consider these factors that might work behind the emergence of profit.

5. Dynamic Theory of Profit:

According to J. M. Clark (1884-1963), an American economist, profit can emerge only in a dynamic society. That is why his theory is called the dynamic theory of profit. We have to remember here the distinction between a dynamic society and a static society.

The society which is constantly changing and where the socio-economic factors like population and labour force, saving and investment, volume of capital, tastes and choices of the people, the standard of education, health and culture, etc. are always changing, is called a dynamic society.

On the other hand, the society where these changes do not occur, is called a static society. According to Clark, changes do not occur in a static society. That is why here there is no risk or uncertainty. In such a society, everything goes on according to routine and everyone has a prior information of what will happen and when.

So here the entrepreneur bears no uncertainty while organising a production process, and he should not get profit as a reward. Therefore, Clark concludes that profit does not arise in a static society. The entrepreneur obtains a price for his product in this society, which would just cover only his cost (including normal profit).

The dynamic society, on the other hand, goes through changes. There the tastes, habits and fashion, the availability of factors of production and the methods and techniques of production are all changing. That is why, in such a society, the entrepreneur has to bear uncertainty. The more successful he is in managing the uncertainties, the higher would be the profit level acquired by him.

It is clear in the above analysis that in a dynamic society, the entrepreneur has to be innovative, for innovations lead to changes and changes inspire innovations. On the other hand, in a static society, innovations do not occur, for such a society does not experience changes. That is why the dynamic theory of profit is considered to be a more general form of Schumpeter’s innovation theory.

Critical Estimates:

The dynamic theory attracts our attention to the fact that dynamism is urgently necessary for the social and economic progress of a society. If the society is dynamic, the entrepreneurs would earn profit and, if they can earn profit, the supply of entrepreneurship increases and, consequently, production in the society increases.

But the dynamic theory of profit also is not a complete theory. Because, this theory also does not explain all the causes of the emergence of profit. For example, this theory does not mention that profit may also arise because of the monopoly power of the firm.

6. Monopoly Power Theory of Profit:

Many economists think that if there is perfect competition in the markets, there cannot be any profit, because absence of competition creates opportunities in the markets to acquire profit. As we know, under perfect competition, the buyers and sellers are assumed to possess full knowledge about the conditions prevailing in the markets.

That is why if the firms in an industry happen to earn more than normal profit in the short run, then in the long run, number of firms and the supply of the product would be increasing and the price of the product would be decreasing till all the existing firms would earn just the amount of normal profit. A firm under perfect competition is one of a large number of firms.

That is why it can sell more or less any amount of its product at the market-determined price. The entrepreneur, here, is not required to take an individual initiative to increase the demand for his product and his sales. Therefore, here the entrepreneur performs his routine activities and for this he gets no more than the normal profit.

On the other hand, if the entrepreneur possesses monopoly power in the market, then he would have to exert individual initiative in giving leadership in the market. Now, in order to maintain his monopoly power and to increase this power, he would have to exercise necessary efforts.

The entrepreneur here has to bear risk and uncertainty, and he would have to expand the dominance of his firm in the market through innovations. If the entrepreneur can perform his job successfully, then he can increase the demand for his product and get a higher price. Consequently, the amount of pure profit earned by him may increase.

Criticisms:

We may argue in favour of this theory that it has rightly emphasised the role of monopoly power in the emergence of profit. But this also cannot be a complete theory of profit.

For we know that even a monopolistic firm can earn less than normal profit or negative pure profit, i.e., we may have p < AC at his MR = MC point. Therefore, the existence of monopoly elements in the market may be a necessary condition for the emergence of profit but it is not a sufficient condition.

7. Labour Exploitation Theory of Profit:

According to the great philosopher and classical economist, Karl Marx (1818-1883), labour is the only factor of production which can produce surplus value. The capitalists acquire profit by expropriating this surplus value. Marx has said that labour is the only productive factor.

Labour is given a rate of wage which is much smaller than the net value produced by it with the help of machines, raw materials, etc. The surplus value is defined as the difference between the net value produced by labour and what it actually gets as wage.

This surplus value is the profit of the entrepreneur who represents the capitalists. There would be an increase in the productivity of labour when this profit is converted into capital and invested again, for now the labour would be able to use more of capital goods or machines.

As the productivity of labour increases, the surplus value created by labour also increases for the rate of wage of the workers generally does not increase, or, increases at a much smaller rate. Thus exploitation of labour goes on increasing at an increasing rate and, along with it, the stock of capital also increases.

Criticisms:

In the labour exploitation theory of profit, the role of labour in the creation of surplus value and the subject of labour exploitation have been rightly emphasised. However, many economists think that, like labour, the other factors of production, like land and capital, are also productive.

Besides, Marx has said that it is the capitalists that acquire profit, i.e., he thinks that capitalists are identical with entrepreneurs, although, in modern economic system, entrepreneurs and capitalists may be separate persons.

Lastly, Marx does not consider the fact that sometimes the entrepreneurs may have to bear risks and uncertainties. Therefore, Marx’s theory, too, cannot be considered to be a complete theory of profit.

8. Marginal Productivity Theory of Profit:

We already know how the marginal productivity (MP) theory of factor pricing may be applied to the determination of the rates of wage and interest. We shall now see how far the theory is relevant in determining the rate of profit. The MP theory says that the price of a factor would be equal to the value of its marginal product (VMP).

Therefore, according to the MP theory, the rate of profit would be equal to the VMP of entrepreneurship or entrepreneurial services. According to definition, the MP of entrepreneurship is the increment in total output obtained as a result of use of the marginal unit of entrepreneurial services.

It may be noted here that if we talk of one marginal unit of entrepreneur in place of one marginal unit of entrepreneurial services, then there would be confusion since a business firm may have one, or, at best, a few entrepreneurs, and entrepreneur is not a continuous variable.

Therefore, while examining the relevance of the MP theory in the area of profit, we should talk not of entrepreneurs, but of entrepreneurial services, the quantity used of which may be measured, say, in units of time as quantity used of labour is expressed in hours.

Then we would be able to say: if the VMP of entrepreneurial services is greater than the rate of profit determined in the market, then the entrepreneur would go on increasing the amount of entrepreneurial services used till the VMP of these services diminishes owing to the law of diminishing returns, to become equal to the rate of profit.

Economies of scope are “efficiencies formed by variety, not volume” (the latter concept is “economies of scale”). In economics, “economies” is synonymous with cost savings and “Scope” is synonymous with broadening production/services through diversified products. Economies of scope is an economic theory stating that average total cost of production decrease as a result of increasing the number of different goods produced. For example, a gas station that sells gasoline can sell soda, milk, baked goods, etc. through their customer service representatives and thus gasoline companies achieve economies of scope.

Whereas economies of scale for a firm involve reductions in the average cost (cost per unit) arising from increasing the scale of production for a single product type, economies of scope involve lowering average cost by producing more types of products.

Economies of scope make product diversification, as part of the Ansoff Matrix, efficient if they are based on the common and recurrent use of proprietary know-how or on an indivisible physical asset. For example, as the number of products promoted is increased, more people can be reached per unit of money spent. At some point, however, additional advertising expenditure on new products may become less effective (an example of diseconomies of scope). Related examples include distribution of different types of products, product bundling, product lining, and family branding.

Economies of scope exist whenever the total cost of producing two different products or services (X and Y) is lower when a single firm instead of two separate firms produces by themselves.

DSC = TC(q1) + TC(q2) – TC(q1, q2) / TC(q1, q2)

Where:

• TC(q1) is the cost of producing quantity q1 of good a separately
• TC(q2) is the cost of producing quantity q2 of good b separately
• TC(q1+q2) is the cost of producing quantities q1 and q2 together
• Economies of Scope (S) is the percentage cost saving when the goods are produced together. Therefore, S would be greater than 0 when economies of scope exist.

If DSC > 0, there is economies of scope. It is recommended that two firms can corporate and produce together.

If DSC = 0, there is no economies of scale and economies of scope.

If DSC < 0, there is diseconomies of scope. It is not recommended to work together for the two firms. Diseconomies of scope means that it is more efficient for two firms to work separately since the merged cost per unit is higher than the sum of stand-alone costs.

Joint costs

The essential reason for economies of scope is some substantial joint cost across the production of multiple products. The cost of a cable network underlies economies of scope across the provision of broadband service and cable TV. The cost of operating a plane is a joint cost between carrying passengers and carrying freight, and underlies economies of scope across passenger and freight services.

Natural monopolies

While in the single-output case, economies of scale are a sufficient condition for the verification of a natural monopoly, in the multi-output case, they are not sufficient. Economies of scope are, however, a necessary condition. As a matter of simplification, it is generally accepted that markets may have monopoly features if both economies of scale and economies of scope apply, as well as sunk costs or other barriers to entry.

Advantages

Economies of scope have the following advantages for businesses:

• Extreme flexibility in product design and product mix
• Rapid responses to changes in market demand, product design and mix, output rates, and equipment scheduling
• Greater control, accuracy, and repeatability of processes
• Reduced costs from less waste and lower training and changeover costs
• More predictability (e.g., maintenance costs)
• Faster throughput thanks to better machine use, less in-process inventory, or fewer stoppages for missing or broken parts. (Higher speeds are now made possible and economically feasible by the sensory and control capabilities of the “Smart” machines and the information management abilities of computer-aided manufacturing (CAM) software.)
• Distributed processing capability made possible and economical by the encoding of process information in easily replicable software
• Less risk: A company that sells many product lines, sells in many countries, or both will benefit from reduced risk (e.g., if a product line falls out of fashion or if one country has an economic slowdown, the company will likely be able to continue trading).

Strategies Economies of Scope

1. Related Diversification

If a company is able to use its operational expertise, resources, and capabilities across its organization, then it can take advantage of related diversification. For example, hiring designers and marketers who can use their skills across different product lines allows for the production of a wide range of products.

2. Flexible Manufacturing

Flexible manufacturing exists if multiple products can be produced using the same manufacturing systems and inputs for example, using the same preparation and storage facilities when making hamburgers and fries, as opposed to using two separate facilities.

3. Mergers

Mergers often enable a company to share research and development expenses to reduce costs and diversify its product portfolio or knowledge. For example, two pharmaceutical companies might merge to combine their research and development expenses to create new products.

4. Linking the Supply Chain

Integrating vertical supply chain assists in reducing costs and wastage. For example, operating multiple businesses under the same entity or having combined management rather than running as separate entities.

5. Acquisition of Companies with Similar Products

Mergers with horizontal acquisition or strategic acquisitions will help achieve the economies of scope as the company will benefit from synergies due to utilization of similar raw materials, production and assembly lines.

6. Diversification

Companies producing different products using similar inputs and production processes will improve productivity.

A cost function is a formula used to predict the cost that will be experienced at a certain activity level. This formula tends to be effective only within a range of activity levels, beyond which it no longer yields accurate results. Beyond the outer thresholds of these activity levels, the cost function must be adjusted to account for such factors as changes in volume discounts and the incurrence of step costs.

Cost functions are typically incorporated into company budgets, so that modelled changes in sales and unit volumes will automatically trigger changes in budgeted expenses in the budget model.

In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy, productively efficient firms optimize their production process by minimizing cost consistent with each possible level of production, and the result is a cost curve. Profit-maximizing firms use cost curves to decide output quantities. There are various types of cost curves, all related to each other, including total and average cost curves; marginal (“for each additional unit”) cost curves, which are equal to the differential of the total cost curves; and variable cost curves. Some are applicable to the short run, others to the long run.

Notation

There are standard acronyms for each cost concept, expressed in terms of the following descriptors:

SR = Short-run (when the amount of physical capital cannot be adjusted)

LR = Long-run (when all input amounts can be adjusted)

A = Average (per unit of output)

M = Marginal (for an additional unit of output)

F = Fixed (unadjustable)

V = Variable (adjustable)

T = Total (fixed plus variable)

C = Cost

These can be combined in various ways to express different cost concepts (with SR and LR often omitted when the context is clear): one from the first group (SR or LR); none or one from the second group (A, M, or none (meaning “level”); none or one from the third group (F, V, or T); and the fourth item (C).

From the various combinations we have the following short-run cost curves:

• Short-run average fixed cost (SRAFC)
• Short-run average total cost (SRAC or SRATC)
• Short-run average variable cost (AVC or SRAVC)

• Short-run marginal cost (SRMC)
• Short-run fixed cost (FC or SRFC)
• Short-run total cost (SRTC)
• Short-run variable cost (VC or SRVC)

and the following long-run cost curves:

• Long-run average total cost (LRAC or LRATC)
• Long-run marginal cost (LRMC)
• Long-run total cost (LRTC)

SRTC and LRTC

The short-run total cost (SRTC) and long-run total cost (LRTC) curves are increasing in the quantity of output produced because producing more output requires more labor usage in both the short and long runs, and because in the long run producing more output involves using more of the physical capital input; and using more of either input involves incurring more input costs.

With only one variable input (labour usage) in the short run, each possible quantity of output requires a specific quantity of usage of labour, and the short–run total cost as a function of the output level is this unique quantity of labor times the unit cost of labor. But in the long run, with the quantities of both labour and physical capital able to be chosen, the total cost of producing a particular output level is the result of an optimization problem: The sum of expenditures on labor (the wage rate times the chosen level of labor usage) and expenditures on capital (the unit cost of capital times the chosen level of physical capital usage) is minimized with respect to labor usage and capital usage, subject to the production function equality relating output to both input usages; then the (minimal) level of total cost is the total cost of producing the given quantity of output.

Short-run variable and fixed cost curves (SRVC and SRFC or VC and FC)

Since short-run fixed cost (FC/SRFC) does not vary with the level of output, its curve is horizontal as shown here. Short-run variable costs (VC/SRVC) increase with the level of output, since the more output is produced, the more of the variable input(s) needs to be used and paid for.

Short-run average variable cost curve (AVC or SRAVC)

Average variable cost (AVC/SRAVC) (which is a short-run concept) is the variable cost (typically labor cost) per unit of output: SRAVC = wL / Q where w is the wage rate, L is the quantity of labor used, and Q is the quantity of output produced. The SRAVC curve plots the short-run average variable cost against the level of output and is typically drawn as U-shaped. However, whilst this is convenient for economic theory, it has been argued that it bears little relationship to the real world. Some estimates show that, at least for manufacturing, the proportion of firms reporting a U-shaped cost curve is in the range of 5 to 11 percent.

Short-run average fixed cost curve (SRAFC)

Since fixed cost by definition does not vary with output, short-run average fixed cost (SRAFC) (that is, short-run fixed cost per unit of output) is lower when output is higher, giving rise to the downward-sloped curve shown.

Short-run and long-run average total cost curves (SRATC or SRAC and LRATC or LRAC)

The average total cost curve is constructed to capture the relation between cost per unit of output and the level of output, ceteris paribus. A perfectly competitive and productively efficient firm organizes its factors of production in such a way that the usage of the factors of production is as low as possible consistent with the given level of output to be produced. In the short run, when at least one factor of production is fixed, this occurs at the output level where it has enjoyed all possible average cost gains from increasing production. This is at the minimum point in the above diagram.

STC = Pk*K + PL*L

Short-run marginal cost curve (SRMC)

A short-run marginal cost (SRMC) curve graphically represents the relation between marginal (i.e., incremental) cost incurred by a firm in the short-run production of a good or service and the quantity of output produced. This curve is constructed to capture the relation between marginal cost and the level of output, holding other variables, like technology and resource prices, constant. The marginal cost curve is usually U-shaped. Marginal cost is relatively high at small quantities of output; then as production increases, marginal cost declines, reaches a minimum value, then rises. The marginal cost is shown in relation to marginal revenue (MR), the incremental amount of sales revenue that an additional unit of the product or service will bring to the firm. This shape of the marginal cost curve is directly attributable to increasing, then decreasing marginal returns (and the law of diminishing marginal returns). Marginal cost equals w/MPL. For most production processes the marginal product of labour initially rises, reaches a maximum value and then continuously falls as production increases. Thus, marginal cost initially falls, reaches a minimum value and then increases. The marginal cost curve intersects both the average variable cost curve and (short-run) average total cost curve at their minimum points. When the marginal cost curve is above an average cost curve the average curve is rising. When the marginal costs curve is below an average curve the average curve is falling. This relation holds regardless of whether the marginal curve is rising or falling.

Long-run marginal cost curve (LRMC)

The long-run marginal cost (LRMC) curve shows for each unit of output the added total cost incurred in the long run, that is, the conceptual period when all factors of production are variable. Stated otherwise, LRMC is the minimum increase in total cost associated with an increase of one unit of output when all inputs are variable.

The long-run marginal cost curve is shaped by returns to scale, a long-run concept, rather than the law of diminishing marginal returns, which is a short-run concept. The long-run marginal cost curve tends to be flatter than its short-run counterpart due to increased input flexibility. The long-run marginal cost curve intersects the long-run average cost curve at the minimum point of the latter. When long-run marginal cost is below long-run average cost, long-run average cost is falling (as additional units of output are considered).  When long-run marginal cost is above long run average cost, average cost is rising. Long-run marginal cost equals short run marginal-cost at the least-long-run-average-cost level of production. LRMC is the slope of the LR total-cost function.

Discounting principle is a continuation of time perspective & we can say it is a corollary of time perspective.

The old proverb “A bird in hand is better than two in the bush” is a representative of this discounting principle. The worth of a rupee receivable tomorrow is less than that of a rupee receivable today. Since the future is unknown & incalculable, also there is a lot of risk & uncertainty about the future. If the return is same for now & future, then definitely present return will be given importance. So, the future must be discounted both for the elements of waiting & risk of the future. Even if one is certain that he will get some income in the future, it is essential to make a discount in the income because he has to wait for the future, which involves sacrifice. Moreover, inflation may reduce the purchasing power. For making a decision regarding investment which will yield a return over a period of time, it is important to find its net present worth. To know the returns over a period of years to decide over an alternative investment, it is necessary to use discounting principle.

This concept is an extension of the concept of time perspective. Since future is unknown and incalculable, there is lot of risk and uncertainty in future. Everyone knows that a rupee today is worth more than a rupee will be two years from now. This appears similar to the saying that “a bird in hand is more worth than two in the bush.” This judgment is made not on account of the uncertainty surround­ing the future or the risk of inflation.

It is simply that in the intervening period a sum of money can earn a return which is ruled out if the same sum is available only at the end of the period. In technical parlance, it is said that the present value of one rupee available at the end of two years is the present value of one rupee available today. The mathematical technique for adjusting for the time value of money and computing present value is called ‘discounting’.

The formula is:

PV = 100/(1+i)

Where,

PV = Present Value

i = Rate of Interest.

The principle involved in the above discussion is called the discounting principle and is stated as follows: “If a decision affects costs and revenues at future dates, it is necessary to discount those costs and revenues to present values before a valid comparison of alternatives is possible.”

The concept of discounting is found most useful in managerial economics in decision problems pertaining to investment planning or capital budgeting.

The Law of equimarginal Utility is another fundamental principle of Econo­mics. This law is also known as the Law of substitution or the Law of Maxi­mum Satisfaction.

We know that human wants are unlimited whereas the means to satisfy these wants are strictly limited. It, therefore’ becomes necessary to pick up the most urgent wants that can be satisfied with the money that a consumer has. Of the things that he decides to buy he must buy just the right quantity. Every prudent consumer will try to make the best use of the money at his disposal and derive the maximum satisfaction.

Explanation of the Law

In order to get maximum satisfaction out of the funds we have, we carefully weigh the satisfaction obtained from each rupee ‘had we spend If we find that a rupee spent in one direction has greater utility than in another, we shall go on spending money on the former commodity, till the satisfaction derived from the last rupee spent in the two cases is equal.

It other words, we substitute some units of the commodity of greater utility tor some units of the commodity of less utility. The result of this substitution will be that the marginal utility of the former will fall and that of the latter will rise, till the two marginal utilities are equalized. That is why the law is also called the Law of Substitution or the Law of equimarginal Utility.

Suppose apples and oranges are the two commodities to be purchased. Suppose further that we have got seven rupees to spend. Let us spend three rupees on oranges and four rupees on apples. What is the result? The utility of the 3rd unit of oranges is 6 and that of the 4th unit of apples is 2. As the marginal utility of oranges is higher, we should buy more of oranges and less of apples. Let us substitute one orange for one apple so that we buy four oranges and three apples.

Now the marginal utility of both oranges and apples is the same, i.e., 4. This arrangement yields maximum satisfaction. The total utility of 4 oranges would be 10 + 8 + 6 + 4 = 28 and of three apples 8 + 6 + 4= 18 which gives us a total utility of 46. The satisfaction given by 4 oranges and 3 apples at one rupee each is greater than could be obtained by any other combination of apples and oranges. In no other case does this utility amount to 46. We may take some other combinations and see.

Units	Marginal Utility Of Oranges	Marginal Utility Of Apples
1	10	8
2	8	6
3	6	4
4	4	2
5	2	0
6	0	-2
7	-2	-4
8	-4	-6

We thus come to the conclusion that we obtain maximum satisfaction when we equalize marginal utilities by substituting some units of the more useful for the less useful commodity. We can illustrate this principle with the help of a diagram.

Diagrammatic Representation:

In the two figures given below, OX and OY are the two axes. On X-axis OX are represented the units of money and on the Y-axis marginal utilities. Suppose a person has 7 rupees to spend on apples and oranges whose diminishing marginal utilities are shown by the two curves AP and OR respectively.

The consumer will gain maximum satisfaction if he spends OM money (3 rupees) on apples and OM’ money (4 rupees) on oranges because in this situation the marginal utilities of the two are equal (PM = P’M’). Any other combination will give less total satisfaction.

Let the purchase spend MN money (one rupee) more on apples and the same amount of money, N’M’(= MN) less on oranges. The diagram shows a loss of utility represented by the shaded area LN’M’P’ and a gain of PMNE utility. As MN = N’M’ and PM=P’M’, it is proved that the area LN’M’P’ (loss of utility from reduced consumption of oranges) is bigger than PMNE (gain of utility from increased consumption of apples). Hence the total utility of this new combination is less.

We then, conclude that no other combination of apples and oranges gives as great a satisfaction to the consumer as when PM = P’M’, i.e., where the marginal utilities of apples and oranges purchased are equal, with given amour, of money at our disposal.

Limitations of the Law of Equimarginal Utility

Like other economic laws, the law of equimarginal utility too has certain limitations or exceptions. The following are the main exception.

(i) Ignorance

If the consumer is ignorant or blindly follows custom or fashion, he will make a wrong use of money. On account of his ignorance he may not know where the utility is greater and where less. Thus, ignorance may prevent him from making a rational use of money. Hence, his satisfaction may not be the maximum, because the marginal utilities from his expenditure can­not be equalised due to ignorance.

(ii) Inefficient Organisation

In the same manner, an incompetent organ­iser of business will fail to achieve the best results from the units of land, labour and capital that he employs. This is so because he may not be able to divert expenditure to more profitable channels from the less profitable ones.

(iii) Unlimited Resources

The law has obviously no place where these resources are unlimited, as for example, is the case with the free gifts of nature. In such cases, there is no need of diverting expenditure from one direction to another.

(iv) Hold of Custom and Fashion

A consumer may be in the strong clutches of custom, or is inclined to be a slave of fashion. In that case, he will not be able to derive maximum satisfaction out of his expenditure, because he cannot give up the consumption of such commodities. This is especially true of the conventional necessaries like dress or when a man is addicted to some into­xicant.

(v) Frequent Changes in Prices

Frequent changes in prices of different goods render the observance of the law very difficult. The consumer may not be able to make the necessary adjustments in his expenditure in a constantly changing price situation.

The incremental concept is closely related to the marginal costs and marginal revenues of economic theory. Incremental concept in managerial economics involves two important activities which are as follows:

• Estimating the impact of decision alternatives on costs and revenues.
• Emphasizing the changes in total cost and total cost and total revenue resulting from changes in prices, products, procedures, investments or whatever may be at stake in the decision.

The two basic components of incremental reasoning are as follows:

• Incremental cost: Incremental cost may be defined as the change in total cost resulting from a particular decision.
• Incremental revenue: Incremental revenue means the change in total revenue resulting from a particular decision.

The incremental principle in economics may be stated as under:

A decision is obviously a profitable one if:

• It increases revenue more than costs
• It reduces costs more that revenues.
• It decreases some costs to a greater extent than it increases other costs.
• It increases some revenues more than it decreases other revenues.

Some businessmen hold the view that to make an overall profit, they must make a profit on every job. Consequently, they refuse orders that do not cover full cost (labour, materials and overhead) plus a provision for profit. Incremental reasoning indicates that this rule may be inconsistent with profit maximization in the short run. A refusal to accept business below full cost may mean rejection of a possibility of adding more to revenue than cost. The relevant cost is not the full cost but rather the incremental cost.

A Simple problem will illustrate this point.

Suppose a new order is estimated to bring in additional revenue of Rs. 5,000/-. The costs are estimated as under:

Labor	Rs. 1,500
Material	Rs. 2,000
Overhead (Allocated at 120% of labour cost)	Rs. 1,800
Selling administrative expenses
(Allocated at 20% of labour and material cost)	Rs. 700
Total Cost	Rs. 6,000

The order at first appears to be unprofitable. However, suppose, if there is idle capacity, which can be, utilised to execute this order then the order can be accepted. If the order adds only Rs. 500/- of overhead (that is, the added use of heat, power and light, the added wear and tear on machinery, the added costs of supervision, and so on), Rs. 1,000/- by way of labour cost because some of the idle workers already on the payroll will be deployed without added pay and no extra selling and administrative cost then the incremental cost of accepting the order will be as follows.

Labor	Rs. 1,500/-
Material	Rs. 2,000/-
Overhead	Rs. 500/-
Total Incremental Cost	Rs. 3,500/-

While it appeared in the first instance that the order will result in a loss of Rs. 1,000, it now appears that it will lead to an addition of Rs. 1,500/0 (Rs. 5,000/- Rs. 3,500/-) to profit. Incremental reasoning does not mean that the firm should accept all orders at prices, which cover merely their incremental costs. The acceptance of the Rs. 5,000/- order depends upon the existence of idle capacity and labour that would go underutilized in the absence of more profitable opportunities. Earley’s study of “excellently managed” large firms suggests that progressive corporations do make formal use of incremental analysis. It is, however, impossible to generalize on the use of incremental principle, since the observed behavior is variable.

The economic concepts of the long run and the short run have become part of everyday language. Managerial economists are also concerned with the short-run and long-run effects of decisions on revenues as well as on costs. The actual problem in decision-making is to maintain the right balance between the long-run and short-run considerations. A decision may be made on the basis of short-run considerations, but may in the course of time offer long-run repercussions, which make it more or less profitable than it appeared at first.

The time perspective concept states that the decision maker must give due consideration both to the short run and long run effects of his decisions. He must give due emphasis to the various time periods. It was Marshall who introduced time element in economic theory.

The economic concepts of the long run and the short run have become part of everyday language. Managerial economists are also concerned with the short run and long run effects of decisions on revenues as well as costs. The main problem in decision making is to establish the right balance between long run and short run.

In the short period, the firm can change its output without changing its size. In the long period, the firm can change its output by changing its size. In the short period, the output of the industry is fixed because the firms cannot change their size of operation and they can vary only variable factors. In the long period, the output of the industry is likely to be more because the firms have enough time to increase their sizes and also use both variable and fixed factors.

In the short period, the average cost of a firm may be either more or less than its average revenue. In the long period, the average cost of the firm will be equal to its average revenue. A decision may be made on the basis of short run considerations, but may as time elapses have long run repercussions which make it more or less profitable than it at first appeared.

illustration:

The firm which ignores the short run and long run considerations will meet with failure can be explained with the help of the following illustration. Suppose, a firm having a temporary idle capacity, received an order for 10,000 units of its product. The customer is willing to pay only Rs. 4.00 per unit or Rs. 40,000 for the whole lot but no more.

The short run incremental cost (ignoring the fixed cost) is only Rs. 3.00. Therefore, the contribution to overhead and profit is Rs. 1.00 per unit (or Rs. 10, 000 for the lot). If the firm executes this order, it will have to face the following repercussion in the long run:

(a) It may not be able to take up business with higher contributions in the long run.

(b) The other customers may also demand a similar low price.

(c) The image of the firm may be spoilt in the business community.

(d) The long run effects of pricing below full cost may be more than offset any short run gain.

Haynes, Mote and Paul refer to the example of a printing company which never quotes prices below full cost due to the following reasons:

(1) The management realized that the long run repercus­sions of pricing below full cost would more than offset any short run gain.

(2) Reduction in rates for some customers will bring undesirable effect on customer goodwill. Therefore, the managerial econo­mist should take into account both the short run and long run effects as revenues and costs, giving appropriate weight to most relevant time periods.

Personality is vital to defining who we are as individuals. It involves a unique blend of traits including attitudes, thoughts, behaviors, and moods as well as how we express these traits in our contacts with other people and the world around us. Some characteristics of an individual’s personality are inherited, and some are shaped by life events and experiences. A personality disorder can develop if certain personality traits become too rigid and inflexible.

People with personality disorders have long-standing patterns of thinking and acting that differ from what society considers usual or normal. The inflexibility of their personality can cause great distress, and can interfere with many areas of life, including social and work functioning. People with personality disorders generally also have poor coping skills and difficulty forming healthy relationships.

Types:

Eccentric personality disorders

People with these disorders often appear odd or peculiar. The eccentric personality disorders include:

Paranoid personality disorder. Paranoia is the hallmark of this disorder. People with paranoid personality disorder have a constant mistrust and suspicion of others. They believe that others are trying to demean, harm, or threaten them.

Schizoid personality disorder. People with this disorder are distant, detached, and indifferent to social relationships. They generally are loners who prefer solitary activities and rarely express strong emotion.

Schizotypal personality disorder. People with this disorder display unusual thinking and behavior, as well as appearance. People with schizotypal personality disorder might have odd beliefs and often are very superstitious.

Dramatic Personality disorders

People with these disorders have intense, unstable emotions and a distorted self-image. They also often tend to behave impulsively. These disorders include:

Antisocial personality disorder. People with this disorder are sometimes called “sociopaths” or “psychopaths.” This disorder is characterized by rash, irresponsible, and aggressive behavior, which often is expressed by a disregard for others and an inability to abide by society’s rules. People with this disorder often commit serious crimes and have a lack of remorse for their actions.

Borderline personality disorder. This disorder is marked by unstable moods, poor self-image, chaotic relationships, and impulsive behavior (such as sexual promiscuity, substance abuse, over-spending, and reckless driving).

Histrionic personality disorder. People with this disorder are shallow and constantly seek attention. They often are very dramatic, possibly even childish, and overly emotional.

Narcissistic personality disorder. This disorder is characterized by an exaggerated sense of superiority, and a preoccupation with success and power. However, this preoccupation is fueled by a fragile self-esteem. People with this disorder are very self-centered, tend to lack empathy, and require constant attention and admiration.

Anxious personality disorders

People with these disorders often are nervous or fearful. These disorders include:

Avoidant personality disorder. People with this disorder tend to avoid social contacts. This behavior is not the result of a desire to be alone but due to excessive concern over being embarrassed or harshly judged. They often miss out on many valuable social experiences because of their fear of being rejected.

Dependent personality disorder. This disorder is marked by dependency and submissiveness, a need for constant reassurance, feelings of helplessness, and an inability to make decisions. People with dependent personality disorder often become very close to another individual and spend great effort trying to please that person. They tend to display passive and clinging behavior, and have a fear of separation.

Obsessive-compulsive personality disorder. This disorder is characterized by a pattern of perfectionism and inflexibility, control and orderliness, with a strong fear of making mistakes. This fear often results in an inability to make decisions, difficulty finishing tasks, and a preoccupation with details.

Causes:

The cause of personality disorders isn’t known. However, it’s believed that they may be triggered by genetic and environmental influences, most prominently childhood trauma.

Personality disorders tend to emerge in the teenage years or early adulthood. The symptoms vary depending on the specific type of personality disorder. For all of them, treatment typically includes talk therapy and medication.

Although research on personality disorders has been limited, no study has been able to show that a person is born with a personality disorder. As is the case with many other mental disorders, the tendency to develop a personality disorder might be inherited, not the disorder itself. The disorder arises when something interferes with the development of a healthy personality.

Personality disorders might develop as a way of coping with a troubling situation or unreasonable stress. For example, a person who was abused or neglected as a child might develop a personality disorder as a way of coping with the pain, fear, and anxiety that exists in his or her surroundings. One thing is known: personality disorders develop over time. A person does not suddenly “come down with” a personality disorder.

Symptoms and their treatment

A person who is shy or likes to spend time alone does not necessarily have an avoidant or schizoid personality disorder. The difference between personality style and a personality disorder often can be determined by assessing the person’s personality function in certain areas, including:

• Work
• Relationships
• Feelings/emotions
• Self-identity
• Awareness of reality
• Behavior and impulse control

Personality disorders treated

People with personality disorders might not seek treatment on their own; and as a result, many go untreated. One reason for the failure to seek treatment might be that many people with personality disorders can function normally in society, outside of the limitations of their disorder.

Most personality disorders are constant and unrelenting, and very hard to cure. However, treatment can help relieve some of the disturbing symptoms of many types of personality disorders.

Treatment varies depending on the type of disorder, but psychotherapy (a type of counseling) is the main form of treatment. In some cases, medication might be used to treat extreme or disabling symptoms that might occur. Medications that might be used include antidepressants, anti-psychotics, anti-anxiety drugs, and impulse-stabilizing medications.

Psychotherapy focuses on evaluating faulty thinking patterns, and teaching new thinking and behavior patterns. Therapy also aims to improve coping and interpersonal skills.

The word personality itself stems from the Latin word persona, which refers to a theatrical mask worn by performers in order to either project different roles or disguise their identities.

Personality, which makes an individual to stand apart, is the impression of characteristic attributes. It is an aggregate of an individual’s physical, psychological and behavioural aspects contributing to his ‘good personality’ or no personality, according to the presence or absence of the characteristic attributes. Some of these, which are of significant nature, are worth mentioning.

1. Omnibus: This personality view is the aggregate of recognizable pattern of properties-of qualities.
2. Integration and configuration: Under this view of personality, the organisation of personal attributes is stressed.
3. Hierarchical: This aspect mainly deals with adaptation, survival and evolution of the person to the environment.
4. Distinctiveness: The definition of this category speaks the uniqueness of each personality.

Significance

Psychological and physiological: Personality is a psychological construct, but research suggests that it is also influenced by biological processes and needs.

Consistency: There is generally a recognizable order and regularity to behaviors. Essentially, people act in the same ways or similar ways in a variety of situations.

Multiple expressions: Personality is displayed in more than just behavior. It can also be seen in our thoughts, feelings, close relationships, and other social interactions.

Behaviors and actions: Personality not only influences how we move and respond in our environment, but it also causes us to act in certain ways.

Functions

1. Personality is organized and constant
2. Personality is psychological, but is used by biological needs and processes.
3. Personality causes behaviour to happen.
4. Personality is displayed through thoughts, feelings, behaviours and many other ways.

Objectives

Self-esteem is often the result of a lifetime of experiences, and particularly what happened to us as children. However, it is possible to improve your self-esteem at any age. This page provides more information about self-esteem, and some actions that you can take to improve it.

Self-esteem is actually about how we value ourselves, and our perceptions about who we are and what we are capable of.

• People with good self-esteem generally feel positive about themselves, and about life. This makes them much more resilient, and better able to cope with life’s ups and downs.
• Those with poor self-esteem, however, are often much more critical of themselves. They find it harder to bounce back from challenges and setbacks. This may lead them to avoid difficult situations. That can, however, actually decrease their self-esteem still further, because they feel even worse about themselves as a result.

Improving Your Self-Esteem

Be nice to yourself

That little voice that tells you you’re killin’ it (or not) is way more powerful than you might think. Make an effort to be kind to yourself and, if you do slip up, try to challenge any negative thoughts. A good rule of thumb is to speak to yourself in the same way that you’d speak to your mates. This can be really hard at first, but practise makes perfect.

Nobody’s perfect

Always strive to be the best version of yourself, but it’s also important to accept that perfection is an unrealistic goal.

You do you

Comparing yourself to other people is a sure-fire way to start feeling crummy. Try to focus on your own goals and achievements, rather than measuring them against someone else’s. Nobody needs that kind of pressure.

Remember that everyone makes mistakes

You’ve got to make mistakes in order to learn and grow, so try not to beat yourself up if you forget to hit CTRL+S on a super-important assignment. Everyone’s been there.

Get movin

Exercise is a great way to increase motivation, practise setting goals and build confidence. Breaking a sweat also cues the body to release endorphins, the feel-good hormones.

Do what makes you happy

If you spend time doing the things you enjoy, you’re more likely to think positively. Try to schedule in a little you-time every day. Whether that’s time spent reading, cooking or just conking out on the couch for a bit, if it makes you happy, make time for it.

Focus on what you can change

It’s easy to get hung up on all the things that are out of your control, but it won’t achieve much. Instead, try to focus your energy on identifying the things that are within your control and seeing what you can do about them.

Building Self-confidence

Confidence is, in part, a result of how we have been brought up and how we’ve been taught. We learn from others how to think about ourselves and how to behave these lessons affect what we believe about ourselves and other people. Confidence is also a result of our experiences and how we’ve learned to react to different situations.

Self-confidence is not a static measure. Our confidence to perform roles and tasks and deal with situations can increase and decrease, and some days we may feel more confident than others.

Low-confidence can be a result of many factors including: fear of the unknown, criticism, being unhappy with personal appearance (self-esteem), feeling unprepared, poor time-management, lack of knowledge and previous failures. Often when we lack confidence in ourselves it is because of what we believe others will think of us. Perhaps others will laugh at us or complain or make fun if we make a mistake. Thinking like this can prevent us from doing things we want or need to do because we believe that the consequences are too painful or embarrassing.

Over-confidence can be a problem if it makes you believe that you can do anything even if you don’t have the necessary skills, abilities and knowledge to do it well. In such situations over-confidence can lead to failure. Being overly confident also means you are more likely to come across to other people as arrogant or egotistical. People are much more likely to take pleasure in your failure if you are perceived as arrogant.

Strategies:

Planning and Preparation

People often feel less confident about new or potentially difficult situations. Perhaps the most important factor in developing confidence is planning and preparing for the unknown.

If you are applying for a new job, for example, it would be a good idea to prepare for the interview. Plan what you would want to say and think about some of the questions that you may be asked. Practise your answers with friends or colleagues and gain their feedback.

Learning, Knowledge and Training

Learning and research can help us to feel more confident about our ability to handle situations, roles and tasks.

Knowing what to expect and how and why things are done will add to your awareness and usually make you feel more prepared and ultimately more confident.

However, learning and gaining knowledge can sometimes make us feel less confident about our abilities to perform roles and tasks, and when this happens we need to combine our knowledge with experience. By doing something we have learned a lot about we put theory to practice which develops confidence and adds to the learning and comprehension.

Positive Thought

Positive thought can be a very powerful way of improving confidence. If you believe that you can achieve something then you are likely to work hard to make sure you do if, however, you don’t believe that you can accomplish a task then you are more likely to approach it half-heartedly and therefore be more likely to fail. The trick is convincing yourself that you can do something with the right help, support, preparedness and knowledge.