Question

Assume that you have just entered the university and wish to select an area of study.

Using the Benefit/Cost (B/C) analysis only, what would your decision be and How would your decision change if you used Cost-Effectiveness (C-E) analysis? Provide the details of your analysis. (350-400 Words)

Answer 1

Cost Benefit Analysis is the strategy to count the benefits over the cost. In other words, it is the process to count all monetary benefits(Direct & Indirect) over all monetary cost (Direct & Indirect) and determine whether it is profitable to go ahead or not to move forward. It is used by Companies and Individuals to take decision before starting new Projects.

To select an area of study inside the University depends on benefits over cost. It can be determined by using Benefit Cost Analysis. Before deciding the area, I will check all the benefits concern to that place. Not only present benefit but future benefits as well. Not only direct benefits but indirect benefits as well. Suppose if all the benefits adding direct and indirect is A and cost of tangible and intangible for that place is B. I will subtract A from B and If A is greater than B that means it is beneficial deal for me. I should select an area without fear but if A is lesser than B than it means it is not good deal. I will lose in this deal. Hence i should not go for it. Therefore, my decision would be depends on Benefits and Costs. I will select an area with more benefits over lesser cost.

Cost Effectiveness Analysis compares cost per consequence of two or more interventions, where consequences are measured by natural units. This technique predicts the non calculated outcomes, which can not be fixed. In this consequences are not monetary. It may high or low. This technique generally used in health departments. If i use this technique i may change my area. The change in decision is happened due to change in technique to evaluate benefits over cost. We will understand this with an example:

Suppose i have selected an area A to study under Cost Benefit analysis. I will use Cost Effective Analysis to evaluate the non-monetary benefits over cost. Suppose If i will choose an Area B to study which have lower benefits than area A but at the same time it also have lower cost than area A and if you will calculate the non monetary benefits over cost you will find that the benefits of area B is more than area A. Hence the decision will be changed to select an area with this theory. But it is not always happen. It depends on Outcomes and the cost. It vary case to case. The calculation are as under:

Area A:

Benefits --- 80

Cost--------- 60

Net Benefits - 80-60= 20

Area B:

Benefits ---- 60

Cost --------- 30

Net Benefit -- 60-30= 30