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Marginal Analysis / Basic Estimation Techniques

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1. You are the manager of the customer service department at a bank and you want to hire customer service representatives for a newly opened bank branch. You realize that you can hire employees with a high school degree (HS) who earn $10,000 annually or employees with a bachelor's degree (B) who earn $20,000. You want to maximize the number of customers served given a fixed payroll. The table below presents historical data on the number of customers served for the given number of workers in each category.

Number of Customers Served
No. of Workers High School Degree Bachelor's Degree

1 80 90

2 140 170

3 190 230

4 230 270

5 265 305

6 295 330

a. You are provided with a payroll budget of $80,000, and your objective is to maximize the number of customers served. How would you allocate the budget in order to achieve your objective?
b. Your assistant suggested that you hire three HS and three B; would you accept the suggestion and act accordingly? Why? Or Why not?
c. If your payroll (budget) is increased to $120,000, what should you do to maximize the number of customers served?

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Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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