The transition from a seller's market to a buyer's market is a cycle consisting, as a rule, of three stages. The first stage is a period of slow growth in per capita consumption of a particular product. The first stage of the transition cycle corresponds to the Industrial Revolution, preceding the ST. The pace of technological progress at this time was relatively low, and the resource intensity of manufactured products was high, which limited the production capabilities of society. During the industrial revolution, demand was satisfied on the same limited scale. It should be added to the above that the first stage of the cycle is characterized by the dominance of the seller's market.
Each point on represents a certain maximum volume of production of two products. Thus, this curve actually depicts a certain boundary. To realize the various combinations of pizza production and robots, represented by points on the production possibilities curve, society must achieve both full employment and production efficiency. Points inside (to the left and below) the curve are also achievable, but less desirable than points on the curve. These points reflect a situation where full employment and production efficiency have not been achieved. At points located outside the production possibilities curve, such as at point W, the volume of production would be greater than at any point on the curve, but such points are unattainable with a given amount of resources and with a given production technology. The barrier created by limited resources and the existing level of technology does not allow any combination of production of capital goods and consumer goods at a point located outside the production possibilities curve.
The production capabilities of society can be used
B. The following cause-and-effect relationship operates in the economy of society. An increase in the production of economic goods, cash income and consumer demand of the population causes an increase in the level of needs. Is there a limit to the progressive growth of needs? This is largely determined by the production capabilities of society.
In the previous section of the manual, we established that the increase in people's needs directly depends on the existing production capabilities of society. Now we have to find out what the boundaries of these possibilities are and the trends in their change.
ECONOMIC NEEDS ARE needs that can be satisfied by consuming some goods or services. The desire to have free time is included in the category of economic needs because it is necessary to enjoy the consumption of certain material goods or services. Goods are things that can be touched, i.e. physically tangible objects - food, shoes, cars, houses, etc. Services include things that cannot be touched with hands, such as medical care, notary or hairdresser services, education, etc. . n. So, human needs for all these goods and services exceed the production capabilities of society.
Society's production capabilities rarity, choice, opportunity costs, efficiency
From a conditional comparison we move on to a strict mathematical comparison of the first best and second best. The Pareto efficient state lies on the production possibilities frontier of society, and finding it can be considered as a maximization problem with a constraint
There are 4 types of soft drinks sold in the market. The production capabilities of society are such that the maximum number of varieties of a product is 6. By reducing the number of varieties of a soft drink by one, it is possible to increase the production volume of each variety by 2 million liters. The maximum rate of transformation of trademarks into production is the same. The utility function of society has the form U = NX, where N is the number of varieties of goods, X is the volume of output of each variety Should a state that maximizes social utility welcome the entry of new sellers into the market or the exit of existing firms from the market
When choosing alternative M, a larger amount of resources will be spent on current consumption, will leave productive circulation, and therefore will be excluded from participation in expanding the production capabilities of society. Accordingly, after a few years the production possibilities curve will deviate only to position A A.
| Rice. 1. Society's production possibilities curve |
However, society does not stand still. Social and economic development is inevitable. Based on one step of scientific and technological progress, it rises to another, to the next. Accordingly, the production capabilities of society increase, that is, the boundaries of limited resources are pushed further and further. This chart shows
How the production capabilities of society change in conditions of economic growth
The production capabilities of society given the given resources and in conditions of economic growth. The concept of opportunity costs and the law of their increase.
It should also be noted that given the maximum level of production possibilities, society is not able to simultaneously increase both military and civilian production and move to point S. Therefore, the transformation curve in economic theory is often called the production possibilities frontier.
THE LAW OF INCREASING RELATIVE COSTS is a law that establishes the relationship between increasing the production of one product by decreasing another. It can act in the case when the production capabilities of society are close to the limit, resources are limited, and profitability decreases. To increase one type of product, the production of another is reduced.
| Rice. 12.3. PRODUCTION POSSIBILITY CURVE OF SOCIETY. Society can gain greater protection from external attack (more guns) only by giving up other goods (butter). | /info/148292">the economy is the same as in problem 3. However, for j shirt production, a new method is invented, thanks to which one worker can produce five shirts per day. There is no improvement in cake production, (a) Show the new frontier society's production capabilities. (b) How does it compare with the previous frontier (c) If consumers prefer to have both cakes and shirts, what is the social choice likely to be about what to produce? Economic growth is an increase in the production capabilities of society. It is measured by the growth rate of real GNP in absolute terms or per capita. Depending on the sources of growth, extensive and |
Can the following points lie on the same curve?
production capabilities:
A(15, 3); B(8, 13); C(13, 6); D(5, 12)?
Solution: No, because b1 > d1 And b2 > d2(8 < 5 и 13 > 12)
and the curve is not convex, which does not correspond to the properties
production possibilities curve.
Task 2.
1. Explain the methodological significance of the production possibilities curve.
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Product |
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Means of production (SP) |
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Consumables (PP) |
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Solution
Calculation of opportunity costs
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Product |
Production program option |
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SP machines |
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SP in PP (how many machines will have to be sacrificed to increase bread production, the denominator is how much bread production will increase, the numerator is how much we reduce the production of machines) |
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PP to SP (vice versa) |
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Task 3. Construct a production possibilities curve based on the initial data
1. Explain the methodological significance of the production possibilities curve.
4. Explain the pattern of changes in opportunity cost values.
Table 1.3
Data table for constructing CPV
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Product |
Production program option |
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Solution
Calculation of opportunity costs
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Product |
Production program option |
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Methodological significance of CPV
The production possibilities curve (frontier) helps determine any combination of production of two goods by an enterprise:
1. When resources are fully loaded (all points on the curve).
2. When resources are not fully used (to the left of the curve).
3. Impossible production (to the right of the curve) due to insufficient resources
It also helps to determine the volume of production of goods with an increase in resources (shift of the curve to the right) and a decrease in resources (shift of the curve to the left).
The pattern of changes in alternative cost values
The opportunity cost of a good, or the cost of increasing the production of one good by decreasing another, increases. These costs are associated with the need for additional costs, for example, for retraining workers, purchasing raw materials, reconfiguring equipment to produce more quantities of one of the goods. Opportunity cost is expressed as the amount of a good that we must sacrifice to increase the production of another.
Task 4.
Seamstress Dotsenko is engaged in individual entrepreneurial activity: she sews fashionable clothes to order. She spends two days on one thing and receives a payment of 60 den. units. As a rule, she also works on weekends. But for the next weekend she was offered a two-day vacation outside the city. The cost of the tour is 100 den. units. Mrs. Dotsenko decided to rest. What will the opportunity cost be?
Answer.
Opportunity costs are equal to the cost of the trip plus the lost opportunity to earn income: 100 + 60 = 160 monetary units.
Problem 5
Construct a production possibilities curve (PPC) for a fictitious country using the following data.
Can the country's economy produce 2 million units of investment goods and 15 million units of consumer goods?
Can the country's economy produce 4 million pieces of investment goods and 3 million pieces of consumer goods?
Answer.
Let's construct a curve point by point.
1. 2 million pieces of investment goods and 15 million pieces of consumer goods correspond to point K on the graph. Since point K lies outside the CPV, the country does not have enough resources for this option. This option is not possible.
2. Point F lies to the left of the CPV. This option is possible for the country, but when it is implemented, some of the resources will not be used, so this option is ineffective.
An agricultural enterprise that specializes in growing vegetables has two greenhouses. In one you can grow 2000 tons of cucumbers or 1500 tons of tomatoes per year. About the second, it is known that the opportunity cost of 1 ton of cucumbers is equal to 0.5 tons of tomatoes with a maximum tomato yield of 600 tons.
1. Determine the opportunity cost of producing cucumbers in the first greenhouse.
2. In which greenhouse is it more profitable to grow tomatoes? cucumbers?
3. Build the enterprise control center.
Answer.
In the first greenhouse, the enterprise can grow 2,000 tons of cucumbers or 1,500 tons of tomatoes. This means that by growing cucumbers, the company loses the opportunity to grow tomatoes.
Opportunity cost of 2000 tons of cucumbers = 1500 tons of tomatoes or
1 ton of cucumbers = 1500/2000 = 0.75 tons of tomatoes;
1 ton of tomatoes = 2000/1500 = 1.33 tons of cucumbers.
First, let's calculate the opportunity cost of growing tomatoes in the second greenhouse:
1 ton of cucumbers = 0.5 tons of tomatoes (according to condition);
1 ton of tomatoes = 1/0.5 = 2 tons of cucumbers.
When comparing the opportunity costs of products in each greenhouse, we can conclude: it is worth growing tomatoes in the first greenhouse, and cucumbers in the second.
To construct the CPV, it is necessary to calculate the maximum volume of products that can be grown in each greenhouse.
Second greenhouse: maximum tomato yield is 600 tons; if you grow only cucumbers, you can harvest: 600x2=1200 tons of cucumbers. (1 ton of tomatoes = 2 tons of cucumbers).
Let's make a table of all possible production options.
A: We grow only tomatoes in both greenhouses. 1500+600=2100 tons
B: the first greenhouse grows tomatoes, the second - cucumbers.
C: the first one is cucumbers, the second one is tomatoes.
D: cucumbers are grown in both greenhouses. 2000 + 1200 = 3200 tons.
Option C does not belong to the CPV, since the CPV must have a convex or straight shape, and points on the CPV are production options in which all possible resources are used.
Task 7.
The graph shows the conditional CPI of a certain country, which determines the correspondence between the production of personal consumption goods and public consumption goods. Determine which of the points on the graph corresponds to the type of economic system.
Answer.
Market economy – C;
Planned economy – B;
Mixed economy - A.
The company plans to release a new type of product and is considering three production technologies.
1. What technology will an enterprise choose if it is interested in using fewer resources?
2. What technology will an enterprise choose if its goal is to obtain maximum profit?
3. Let us assume that the price of the resource “labor” has decreased to 2 monetary units. per unit, and the resource “capital” increased to 6 monetary units per unit. How will the company's choice change?
Answer.
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Resources |
Price per unit of resource (monetary units) |
Required amount of resources (units) |
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Technology 1 |
Expenses |
Technology 2 |
Expenses |
Technology 3 |
Expenses |
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technology No. 2 or No. 3, since these technologies use the least resources.
with the same output of products, those enterprises that have lower costs receive greater profits, therefore technology No. 2.
if resource prices change, the costs will be equal to:
Technology 1: 2x6+2x1+6x2=26
Technology 2: 2x2+2x2+6x3=26
Technology 3: 2x3+2x1+6x3=26
That is, all technologies have the same efficiency and an enterprise can choose any one.
Grandmother, mother and daughter organized a family business knitting woolen socks and mittens. In a year, a mother can knit 250 pairs of mittens or 300 pairs of socks, a grandmother - 210 pairs of mittens or 350 pairs of socks, a daughter - 150 pairs of mittens or 300 pairs of socks. Draw a family production possibility curve.
The opportunity cost of producing one pair of mittens, expressed in terms of the number of pairs of socks, is:
for the mother - 1.2;
for grandmother - 1.67;
for my daughter - 2.
Accordingly, the graph will have the following inflection points:
A- Daughter, mother and grandmother only knit socks. 950 pairs of socks will be produced.
B- The mother knits mittens (she has the lowest opportunity cost of producing mittens), the grandmother and daughter knit socks. Will be produced: 250 pairs of mittens and 650 pairs of socks.
IN- The daughter knits socks (she has the highest opportunity cost of producing mittens), the mother and grandmother knit mittens. Will be produced: 460 pairs of mittens and 300 pairs of socks.
G- The whole family knits mittens. 610 pairs of mittens will be produced.
Production capabilities of society - these are the possibilities of society for production economic benefits with full and efficient use of all available resources at a given level of technology development. Since resources are limited, society is forced to make technological choices, deciding which needs should be satisfied and which should not.
Thus, the limited resources determine the alternative nature of their use and necessitate an alternative choice from among the mutually exclusive possibilities of the most optimal option from the point of view of the goals of society. Alternative choices between resource uses can be represented by a production possibilities curve.
Production possibility curve shows the maximum possible volume of simultaneous production of two goods with full use of limited production resources, when, at a given level of production and available technology, there are no resources to increase the volume of production.
The economy is efficient , when all points of possible combinations of production of two goods are on the production possibilities frontier (i.e. A, B, C, D, E). The economic system is inefficient , when various combinations of production of two goods are to the left of the production possibilities frontier (point F).
In this case, society's resources are not fully occupied ( unemployment , incomplete utilization of production capacity, backward technology). Point F represents a combination of goods X and Y that is significantly less than could be produced with full and efficient use of available resources. Society must do whatever is necessary to move to the production possibilities frontier.
For a society that has a certain supply of resources and knowledge and ensures the full volume of production, point G is currently unattainable.
8. Main factors of production and their interaction.
Factors of production- These are the resources necessary for the production process.
Exists four main factors of production:
1) labor. This is the economic activity of people aimed at generating income and satisfying needs. In the process of work, a person expends physical and mental energy. In various types of work, intellectual labor or physical labor may predominate. Labor can be simple and complex, skilled and unskilled. The result of labor can be a material (a residential building, a parking lot, a bridge across a river) or an intangible product (for example, information, a service);
2) capital. These are means of production for long-term or short-term use (raw materials, machinery, equipment, structures). Separately, money capital is distinguished - financial assets intended to be converted into real ones. Money itself is not a factor of production, but it plays a significant role in the activities of an enterprise;
3) land (natural resources). Earth is every place where a person is (resting, working, etc.). There are a variety of businesses located on the land. The earth is a source of minerals and natural resources. Land as an economic factor takes into account all these functions of natural factors in the economy;
4) technical progress. Industrial installations may have the same cost, but one may be new and the other obsolete. If other factors of production are the same, then the best economic results will be achieved by an enterprise using modern equipment;
5) information. Due to the widespread use of computer technology, information begins to play a significant role in production. Possession of information helps an enterprise to carry out its activities more efficiently.
Interaction and combination of production factors. Production requires certain resources that are used in the right combinations. All resources cannot participate in production in isolation. They interact only in certain combinations. They all complement each other. At the same time, they interact. For example, machines and equipment can be replaced by the labor of workers, natural materials - by artificial ones.
When one type of resource becomes more expensive for some reason, they try to replace it with a cheaper one, and accordingly, the demand for it increases. An increase in demand can lead to an increase in the price of a particular resource. Therefore, a change in the price of one resource leads to a change in the prices of other resources.
The supply of production factors primarily depends on the specifics of each market. Depending on market development factors, the offer is formed. However, what all markets have in common is that the amount of resources offered for sale is limited compared to the needs for their production.
For a manufacturing enterprise, market prices are of great importance. The level of production costs depends on them. Given the existing technical base, prices will determine the amount of resources that can be used.
Labor (labor force)
Natural resources
ENTREPRENEUR
Type of income
Salary
(entrepreneurial activity)
Rice. 2.1. Main types of production resources and income from their use
always causes controversy in society, since its meaning is ambiguous: for the tenant it is payment for the main agricultural resource and is included in production costs; for the landowner, this is the usual income on the capital invested in the land; finally, for society this rent is a kind of tribute paid to landowners by buyers of agricultural products. It is obvious that the presence of an owner of the land and its payment often contribute to increasing the efficiency of use of land resources.
Interest (in this case) is a payment from an entrepreneur (borrower) to any individual or legal entity (lender) who provided him with his monetary, or real, capital for the use of this capital. The lender may be a bank that has lent money to an entrepreneur to purchase means of production; a bondholder of a firm who has lent it some of his money; any lessor who leases outbuildings, equipment and other capital resources owned by him. An entrepreneur's income is profit, i.e. remuneration (payment) to an entrepreneur for the work (expenditure) of his entrepreneurial abilities, i.e. for the fact that he paid for and collected together labor, natural and capital factors of production, and also organized their economic functioning and assumed responsibility and risk for their effective use. I! In any business, risk is inevitable. Profit (if it is semi-The production capabilities of society depend on how economic resources are used in the economy.
It has already been noted that there is an inverse relationship between the needs of people and the capabilities (productive resources) to satisfy them: if the former are limitless, then the latter are very limited, that is, they can be used in quantities not exceeding a certain limit, limit. Due to limited production resources, people are constantly faced with the problem of choice: what and how much to produce, sell, buy. Limited resources mean that choosing one product leads to the rejection of another (for example, what is better: eating your favorite ice cream or buying an interesting book?). When managing an economy, you have to choose ways to use resources that will satisfy your most preferred needs, that is, which goods and services should be produced and which will have to be abandoned. In this regard, let us turn to the concept of production capabilities.
Production possibilities are the maximum quantity of goods and services that can be simultaneously produced over a given period of time, given resources and technology. This refers to the efficient use of all available resources (labor, means of production and other economic factors). For clarity, let's consider a conditional example. It is known that an economic economy produces two groups of products: means of production (production goods) and consumer goods (consumer goods). In our example, for simplicity, they are collectively represented by machines and books. The general limitation of resources allows these goods to be produced during the year in the following alternative ratios:
a) ten presses with zero book output;
b) nine machines and one book;
c) seven machines and two books, etc. (Table 2.1).
On the graph (Fig. 2.2), constructed according to the data in Table. 2.1, point A reflects a situation in which all resources are directed to the production of machines, and point D represents an alternative when only books are produced. In reality, society tries to avoid such extremes and always strives to find the balance it needs in
Distribution of production. Points B, C and D represent alternative options for such a balance, i.e. the maximum possible volume of simultaneous production of both machines and books in various combinations (more machines - fewer books, and vice versa). Limited material and human resources make any combination of production of machines and books beyond the production possibilities frontier (PPF) unfeasible, for example, at point I (from the word “impossible”), corresponding to the production of two units of machines and seven units of books. In contrast, the production combination at point M (from the word “possible”) is quite real, but resources are used incompletely and inefficiently (low labor force employment and labor productivity, unloaded factories, excessive raw material costs, etc.). Consequently, there are reserves here to increase the production of one
product without reducing the output of another.
9 1Border
production capabilities
Thus, only points located on the production possibilities frontier correspond to the most efficient use of available resources to produce certain goods and services. Society must only choose the desired combination of them.
Rice. 2.2. Production possibility curve at full use of resources
Production capabilities reflect the maximum production with full use of given resources and technologies. However, over time, resources and technologies usually change progressively: the number of labor increases and
New GPV line
means of production, their quality improves, technologies are improved, etc. All this expands the possibilities of production, and consequently, the GPV line shifts to the right of the center of coordinates. The capacity of a society to produce different products most often does not grow to the same extent.
Books, million copies
Rice. 2.3. Production possibility curve under conditions of economic growth
Thus, considering our example with the production of books and machine tools in the conditions of increasing resources and technological progress, let us assume that the book publishing base has doubled, and the machine tool industry has doubled by 40%. Then new production alternatives for the production of books and machines will arise (Table 2.2, Fig. 2.3), and the new GPV line will take the following position on the graph. Thus, technological progress, growth in quantity and quality
human and material resources make it possible to increase the output of goods and services.
The reasonable choice of a specific production alternative at present largely determines production capabilities and the growth of society's well-being in the future.
3.2. Main features of commercial farming
In one field, a farmer can produce 500 tons of potatoes or 100 tons of wheat, and in another, the opportunity cost of growing 2 tons of wheat is equal to 5 tons of potatoes with a maximum potato production of 1000 tons. Draw the farmer's production possibility curve.
Solution:
Production Possibility Curve (PPC)- this is a curve, each point of which shows the maximum quantities of two economic goods that the country's economy is capable of producing with the full and efficient use of available resources and the current level of technology.
From the problem statement it is known that in the first field the farmer can produce either 500 tons of potatoes or 100 tons of wheat.
To construct the production possibilities curve of the first field, we plot along the y-axis (wheat) the maximum amount of wheat grown that would be produced in the economy if all available resources were allocated to the production of wheat, that is, 100 tons. Potato production in this case is zero.
And vice versa, if all available resources are directed to the production of potatoes, then the maximum quantity - 500 tons, which can be produced with the full and efficient use of available resources, we plot along the x-axis (potatoes). Wheat production in this case is zero.
By connecting these two points, we obtain the CPV of the first field.
At the same time, the opportunity cost (AC) of producing 1 ton of potatoes is the amount of wheat that the farmer is forced to refuse to grow:
100 / 500 = 0.2 tons of wheat.
In the second field, the farmer can produce a maximum of 1000 tons of potatoes or 400 tons of wheat, since the opportunity cost of growing 2 tons of wheat is equal to 5 tons of potatoes. Or the opportunity cost of 1 ton of potatoes is equal to 2 / 5 = 0.4 tons of wheat.
Let's build the total CPV for this farmer.
The maximum possible volume of wheat grown is 500 tons (in the first field he can grow 100 tons, in the second - 400 tons). In this case, the volume of potatoes will be zero. Let's mark the corresponding point on the graph (point A).
For this purpose, we will choose from two fields the one in which growing each unit of potatoes will lead to the least loss of wheat volume. That is, we will choose the field where the opportunity costs of growing potatoes are the lowest.
In the first field, the opportunity cost of 1 ton of potatoes is equal to 0.2 tons of wheat.
And in the second field, the opportunity cost of 1 ton of potatoes is equal to 0.4 tons of wheat.
0.2 is less than 0.4, which means that it is more profitable to use the first field to produce the first tons of potatoes.
A maximum of 500 tons of potatoes can be grown on the first field, while sacrificing 100 tons of wheat.
The coordinates of the turning point (point B) are 500 tons of potatoes, 400 tons of wheat.
The maximum amount of potatoes that can be grown on two fields is 1500 tons (500 tons on the first field and 1000 tons on the second). In this case, the volume of wheat will be zero. Let's denote point C on the abscissa axis.
By connecting three points A, B and C in succession, we get the total production possibilities curve of our farmer.
Self-development
