Home' Trinidad and Tobago Guardian : July 10th 2014 Contents JULY 2014 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG17
The concept of total cost refers
to the overall opportunity cost
incurred by a business to pro-
duce what is sold.
The term produce' is used loosely as this
approach can also be adapted to the business
consultant giving a service. We may view
this total cost concept as consisting of a vari-
able cost, which is dependent on how many
of the items are produced, and fixed costs,
which do not change in relation to the quan-
Through its interaction with small and
medium enterprises (SMEs), the chamber's
Nova Committee's observes that SMEs that
while access to finance continues to be a
challenge for many, equally important is the
ability to adequately manage, analyse and
understand such business' finance. Another
major challenge is crafting the most appro-
priate selling price for products or services.
This may be because the ability to set an
appropriate selling price is often dependent
on one's understanding of the concept of
Let's use an example of the fictitious busi-
ness, Sugarcake.com, a manufacturer of the
most scrumptious coconut-based delicacies.
The total cost incurred by this entrepreneur
in a production run can be divided into our
two components of "fixed" and "variable."
The fixed cost of the production run will be
opportunity cost of production that does not
vary with the quantity of sugarcakes pro-
duced. For every business there will always
be a fixed level of overhead expenses that
may include rent, administrative salaries or
even interest on the small business loan taken
for equipment purchase. It is important to
note that whether Sugarcake.com produces
one sugarcake or 100, its fixed costs will not
The variable cost is that cost of production
that does vary with the amount of sugarcakes
made. In our example, if production increases,
then variable cost increases also as most variable
costs are based on the use of variable inputs.
Sugarcake.com will incur different variable
cost when it buys greater quantities of coconut,
sugar and vanilla essence, depending on the
increased need for additional labour, this can
also factor in.
All of these increased inputs will be the
end result of needing to make greater quan-
tities of actual sugarcakes. We can conveniently
summarise this division of total cost into fixed
and variable cost by the formula: Total cost
= total fixed cost + total variable cost.
Why does Sugarcake.com need to know
this? Quite simply, it is only after the total
cost of production has been arrived at can
an appropriate selling price be crafted. This,
of course, is done by the addition of your
This and other interesting topics are being
explored right now at the Fourth biennial
SME conference titled, Innovation in Business:
The Caribbean Experience, which you can
even now follow facebook.com/NovaCom-
mitteeTT to get updates on the conference.
If you unfortunately had to miss this con-
ference, it will be followed on September 18
and 19 by an intense workshop titled, Finance
and Cash Management for Entrepreneurs, in
which the many challenging issues concerning
both access to finance as well as the effective
management of same will be treated with.
Have you set the right price?
"If you love nature, stay away from it", are the seemingly
counter-intuitive and baffling words of Edward Glaeser, dis-
tinguished Harvard economist and author.
There is a common misconception---held by the
wider public, policymakers, and even urban
planners---that urban living is the antithesis
to environmentalism. On an individual level,
the notion that more space, and privacy from
our neighbours, makes us happier and healthier
is part of the rhetoric that is well publicised by the mainstream
media. Urban areas have been painted as smog-filled, concrete
jungles that do more harm than good to the environment. At
the same time, the suburban yard with its green grass and
countless fruit trees is touted as the responsible, environmen-
tally-friendly, and ideal way to live.
In reality, living in a well-planned, dense urban environment
is perhaps the best thing that you can do for the environment.
Greater density means we live in smaller spaces, and as a
result, tend to consume fewer resources. We likely burn less
gas, and may be able to live without an automobile, as we live
closer to places of work and recreation. Less electricity is
required to cool our smaller home.
We consume less land as we build upwards instead of out-
wards. It is highly likely that we accumulate less unnecessary
possessions as we don't have garages and superfluous rooms
to store them in. We may conserve water as less is wasted
trying to keep our lawns green. In other words, in most
instances, living in a small apartment in Woodbrook is more
environmentally-friendly than living in a single-family house
in the Diego Martin Valley.
It is quite worrying that many urban planners do not seem
to understand the relationship between density and the envi-
ronment. In reviewing planning applications planners often
point out that a particular multi-story building is too tall, that
a yard is too small, that there are too many units for a plot
of land, or, that a building needs to be set back farther from
Minimum plot sizes, maximum building heights, and building
setbacks all serve a purpose. The problem that arises is that
these rules, as currently implemented in T&T, serve to create
a low-density, car-dependent, sprawling built environment,
in stark contrast to the goals of the Ministry of Planning and
Sustainable Development. Do the planners that vehemently
defend these policies understand their intended outcome---an
ever-expanding urban form that consumes every imaginable
resource at a rapid rate?
Policymakers are unfortunately just as ill-advised. The
recently-opened Tamana Intech Park is a prime example.
Apart from the outdated technology park model which Tamana
is based on, the notion of the park as an environmentally-
sensitive development is a fallacy.
It is unfortunate that at a time when some of the world's
most successful cities are turning clusters of derelict and aban-
doned urban buildings into new science, technology, and light
manufacturing districts, we have created a massive sprawling
1,100 acre new development on what was mostly undeveloped
Instead of breathing new life into places that have already
been urbanised, where concrete has already been poured, we
are consuming more virgin land and then calling it environ-
mentally-sensitive development. But wait, there is lots of
grass, and the flagship building is energy-efficient! It would
be highly amusing if it weren't so absolutely distressing.
Greenwashing is a term used to describe individuals or
organisations that deceptively market their goods or services
as environmentally-friendly. In a wider context, greenwashing
should also refer to any idea that leads people to believe that
a society can solve a sustainability crisis simply by more ener-
gy-efficient, green consumption.
In other words, buying more fuel-efficient vehicles or using
energy-efficient appliances won't solve our problems---we
need to reduce our need to drive, and the spaces that our air-
conditioning units need to cool.
We need to reduce our demand for resources, and that
involves overhauling our way of life. Jeff Speck, author and
urban planner, has shown that on average, if you change all
of your light bulbs to energy-efficient ones, you'll save as
much energy in a year as you would in a week by moving to
a walkable urban environment.
It is imperative that urban professionals and policymakers
enable and advocate for the creation of dense, vibrant urban
areas, and prove to the wider public why living in a walkable
city is not only good for the environment, but also the individual.
Hopefully, we---policymakers, professionals, and the wider
public---will come to realise that concrete is greener than grass.
This article was submitted by
a member of the T&T Society of Planners
Concrete is greener than grass
T&T Society of Planners
T&T Chamber of
Industry and Commerce
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