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UBC Theses and Dissertations

Approach to marginal analysis McLean, William Robert

Abstract

This thesis developed a pragmatic approach to the optimization of business decisions in the chloralkali industry utilizing basic marginal analysis concepts. It attempted to meld accounting principles and techniques with economic concepts for the purpose of establishing a rationale and a workable model for guiding and evaluating everyday business decisions. The approach concentrated on short run decision making and did not get involved with capital and other variables which were fixed in the short run. Many attempts to apply marginal analysis to the real world have had only limited success. The concepts as outlined in this thesis used a particular empirical example to circumvent some of the inherent difficulties associated with marginal analysis. The emphasis in this study was to develop a useful business tool and not to fit theoretical economic concepts into the real world. The special requirements for this model were a capital intensive multiproduct company with a vertically integrated production line. Each product manufactured should have two outlets; a) to be used as raw materials to upgrade the product by further processing, or b) to be sold in the market place. Consequently, the product lines will be developed from relatively few raw materials. This is the situation in most petrochemical and inorganic chemical plants, oil refineries, and could even be applied to entire industries such as forest products, and pulp and paper. Although the chloralkali model's construction were discussed, the model itself was not included in the thesis. The particular model used was large and complex, specially adapted for the firm, and as a result contained confidential information and relationships which were difficult to disguise. The empirical example assisted in the development of the essential concepts but did little to contribute to the proving of the hypothesis.

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