Making a tradeoff between current and future needs
The Just One Fallacy
When companies manufacture or trade a product or render a service, every extra unit required to be produced/traded/serviced does not give additional fixed cost to the company as long as the extra unit is in the relevant volume range. What such an extra unit of sales adds to the total cost is it’s per unit variable cost only. So, there is a natural tendency for the business unit to ignore the impact of such additional unit of sales under the premise that the fixed cost is a irrelevant for the decision of whether to sell that extra unit or not.
But the problem comes only when the business unit started selling “N” number of additional units, assuming that these additional units do not add additional fixed costs, which is certainly fallacious.
As the company keeps on adding additional units in its operations, these units put together cross the relevant volume range and, thereby, start giving additional fixed cost to the company, which is ignored by decision-makers. This phenomenon of ignoring additional fixed costs for additional small volume of sales is known as “The Just One Fallacy”.
If Mr Kumar decides to spend his accumulated savings on present luxuries than on avenues that would cater to meeting the future necessities, the better explanation for such the decision may perhaps be that he is in the just one fallacy, i.e, he may feel that he is spending the hard-earned
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