Having become acquainted with the factors of production, let us now turn to the issue of their use for the production of various goods and services. The production capabilities of society depend on what will be the specific "distribution" of resources in the economy. For Russia, this problem is more than urgent. In socialist times in the huge and then still richest Soviet Union, few people think about severe limitation and interdependence of economic resources society. Infinitely increasing the output of, say, combines at Rostselmash, business executives did not want to notice that this was taking away from the country the opportunity to at least mitigate the situation with the shortage of household vacuum cleaners and refrigerators.
So between needs people and opportunities to satisfy them, there is an "unpleasant" but inevitable feedback: if the former are limitless, then the latter are very limited. From here in front of people constantly rises problem of choice. Even in everyday life, at every step we solve problems like "which is better": eat our favorite ice cream or buy an interesting book? In economics, this problem manifests itself in the need to choose between alternatives : what products should be produced and which ones should be discarded. For limited resources also means limited production. Focusing, for example, on the production of "guns", society will inevitably be forced to reduce the production of "butter". This brings us to the concept of production possibilities.
Manufacturing capabilities– this is the maximum number of goods and services (in a certain set of them) that can be simultaneously produced for a given period, given resources and technologies. This means that all available resources (labor, means of production and other economic factors) are used most fully and efficiently.
For clarity, consider conditional example. It is known that each economy produces two large groups of products: means of production (production goods) and consumer goods (consumer goods). Let in our example, for simplicity, they are collectively represented by machines and books. The general scarcity of resources makes it possible to produce these goods per year, for example, in the following alternative ratios: either (A) 10 units of machine tools with zero book production, or (B) 9 units of machine tools + 1 unit of books, or (V) 7 units of machine tools + 2 units of a book and so on (Table 2.3). Based on the data in this table, you can build a graph, the curved line of which will reflect production frontier (GPV) for machines and books in our example (Fig. 2.13). So, point A shows an alternative in which all resources are directed to the production of machine tools, and point D - a situation when only books are published. However, these are two clearly unrealistic extremes. In fact, society always strives to find the balance it needs in the distribution of production. Points B, C and G just represent alternative options for such a balance, i.e. maximum possible volume of simultaneous production and machine tools, and books in their various combinations. More machines means fewer books, and vice versa.
Table 2.3
Possibilities of annual production of books and machines with full use of resources
At the same time, the limited material and human resources makes any combination of the production of machine tools and books impracticable. out GPV lines - say, in point N (from the word "no") with the release of 2 units of machines and 7 units of books. In contrast, production combinations inside GPV (for example, in point M - "can") are quite real, but at the same time resources are used incompletely and ineffectively (unloaded factories, low employment of the labor force in society, low labor productivity, excessive consumption of raw materials, etc.). Accordingly, there are reserves for increasing the production of one product without reducing the output of another.
Thus, only points on the line of the production possibilities frontier show the most efficient options for using available resources for the production of certain goods and services.
Society should only you
Rice. 2.13.
take the desired combination. In this case, however, you will have to "pay" for the choice made with the so-called imputed (or hidden) costs, which we now turn to consider.
Any economic system faces a dilemma: on the one hand, the needs of society are unlimited, completely insatiable; on the other hand, the resources of society required for the production of goods are limited or scarce. The problem of limited resources is a fundamental economic problem.
Limited goods means that for any person and society as a whole, most goods and services are limited, that is, not enough to satisfy all needs. Limited resources means that the production capabilities of society are limited, that is, society is forced to produce a limited amount of goods. Increasing the production of one good, society is forced to reduce the production of another. Choosing one production option means sacrificing other options. Society is faced with a choice of which goods to produce and which ones should be discarded. This problem faced all economic systems in the past, stands today and will continue to face tomorrow.
Using the simplest model, we will consider the production capabilities of society. Consider a hypothetical economy in which two goods are produced - X and Y. Suppose also that the amount of resources and production technology are constant. Let us assume that the given economic system is efficient, that is, it operates under conditions of full employment of resources and full volume of production.
If absolutely all resources are directed to the production of good X, then society will receive the maximum amount of it. In this case, the benefit Y will not be produced at all (option A). Another alternative is possible, when all the resources of society are directed to the production of goods Y. In this case, the good Y is produced in the maximum quantity, but the good X is not produced (option B). However, society needs both goods at the same time, for which it is necessary to reduce the production of each of these goods below the maximum. At the same time, there are many alternative options for production combinations of resources and the corresponding production structure (for example, options C, D, E). This situation can be depicted graphically. We shall postpone the amount of good X horizontally, and the good Y along the vertical. As a result, we will get the curve of production possibilities. Each point on this curve represents a certain combination of two kinds of goods. For example, point C represents a combination of Xc pcs. goods X and Yc pcs. product Y.
Production Capability Curve shows "the maximum possible volume of simultaneous production of two goods with given resources and technologies at the disposal of a given society.
The economy is efficient when all points of possible combinations of production of two goods are on the border of production possibilities (i.e. A, B, C, D, E). The economic system is ineffective when various combinations of production of two goods are to the left of the production possibilities frontier (point F). In this case, the resources of society are not fully occupied (unemployment, incomplete utilization of production capacities, backward technology). Point F represents such a combination of benefits X and Y, which is significantly less than could be produced with the full and efficient use of available resources. Society must do whatever is necessary to move to the frontier of production possibilities. For a society that has a certain stock of resources and knowledge and provides the full volume of production, the G-spot is unattainable today. Any economic system at any given time has limited capabilities and cannot move beyond the boundaries of production capabilities.
The problem of choice is the main problem associated with limited resources. However, limited resources lead to the emergence of several more. Competition, rationing and discrimination are such problems. Since there are many options for using resources, and the number of these resources is limited, competition inevitably arises. Competition- economic rivalry of commodity producers, aimed at obtaining the greatest amount of resources at their disposal. Rationing- a distribution system that sets the maximum amount of a good or resource that an economic unit can acquire. Rationalization is a way of distributing any good or resource, the supply of which is lower than demand. In a free market, this situation does not arise. At one time, rationing was widely practiced in our country, which has experienced various types of deficit since 1917 and the subsequent rationing. As an exceptional measure, rationing also takes place in the economies of developed countries. For example, in the United States during the Second World War, it was quite effective. Discrimination- restriction or deprivation of access to any benefits of certain categories of citizens on the basis of race, nationality, social origin, political views, etc. An example is discrimination in the labor market.
The curve of production possibilities demonstrates that an increase in the production of one good is possible only at the expense of a simultaneous decrease in the production of another good. The content of the problem of choice lies in the fact that if the economic resource used to meet the needs of society is limited, then there is always the possibility of its alternative use. What society refuses is called the imputed (hidden or alternative) costs of achieving the chosen result. Let us compare points C and D. Having chosen point C, society will prefer the production of more good Y (Y c) and less good X (X C) than choosing point D and producing goods Y - Y D, and goods X - X D. When moving from point C to point D, society will receive an additional amount of good X (ΔX = X D - X c), donating for this some amount of good Y (ΔY = Y C - Y D). Opportunity Cost any good - the amount of another good that must be sacrificed in order to get an additional unit of this good.
The production opportunity curve is concave from the point of origin, demonstrating that an increase in the production of one good is accompanied by an increasing reduction in the production of another good. Based on these observations, we can formulate law of increasing opportunity costs: in a full employment economy, with an increase in the production of one good per unit, more and more other goods have to be sacrificed. In other words, the production of each additional unit of good Y is associated with the loss of more and more good X for society. The law of increasing opportunity costs is explained by the specifics of the resources used. In the production of alternative goods, both universal and specialized resources are used. They vary in quality and are not completely interchangeable. A rationally acting economic entity will first involve in production the most suitable, and therefore the most effective resources, and only after their depletion - less suitable. Therefore, in the production of an additional unit of one good, universal resources are initially used, and then specific, less efficient resources are involved in production, which can be used only partially. In addition, in the production of alternative goods, the consumption rates of the same materials differ significantly. In conditions of limited resources and lack of interchangeability of resources, the opportunity costs will grow as the production of an alternative good expands. If any unit of resources were equally suitable for the production of alternative goods, then the production possibility curve would be a straight line
Under production capacity of society is understood as the maximum volume of production achievable in a given period of time. In terms of its material content, such a volume of production is defined ambiguously. It can be made up of different specific sets of products. Its achievement presupposes the full and rational use of the entire labor potential of society, the absence of useless labor losses.
The production capabilities of society can be expressed by the formula:
PV = T NS · PT ;
where: PV - production capabilities of society; T NS – labor potential of society; PT- labor productivity.
If the production capabilities of society are fully used, then an increase in the production of any product can be carried out only by reducing the production of any other products; it presupposes a redistribution of social labor: an increase in its expenditure on the manufacture of some products and a decrease in the production of others. In this case, the reduction in the production of other products is a kind of payment for the increase in the production of this product.
With the development of society, the means of production and technology are improved, the labor skills of workers are increased, and new natural resources are being drawn into production. As a result, the boundaries of the production possibilities of society expand, but in each specific period of time they remain set.
The full realization of the production possibilities of a society is almost never achieved. This is due to the fact that usually some part of the labor potential is used irrationally or generally remains unused. The latter is expressed, for example, in the presence of unemployment, which currently occurs in all countries of the world.
To explain the concept of the production possibilities of society, it is usually used production capability curve... It expresses the relationship between the production volumes of any two types of products at full employment of production resources. If by full employment of resources we mean full use of the labor potential of society, then this curve reflects the real relationships in the economy.
An example of the curve of the production capabilities of society is shown in Fig. 1. As two items are taken cannons and butter... The abscissa shows the annual volume of oil production (tons), the ordinate - guns (pcs.).
The Opportunity Curve is a graphical representation of all combinations of oil and cannon production volumes assuming full use of the labor potential of society and constant production volumes of all other goods... Its descending form means that with the full use of the labor potential of society and with a given volume of production of other goods, an increase in the production of one of the selected goods - guns or oil - leads to a reduction in the production of the other.
Two points A and B with coordinates ( X A, Y A) and ( X B, Y B) respectively depict different combinations of oil and cannon production volumes. When going from combination A to the combination B the volume of oil production is growing ( X A < X B), and the cannons are reduced ( Y A >Y B). Society in the assumed conditions, as it were, refuses to produce guns in quantities ( Y A – Y B) ("Opportunity cost") to increase oil production by ( X B – X A). (If, on the contrary, there is a transition from the combination B to the combination A, then there is a refusal to produce oil in the amount ( X B – X A) in favor of increasing the production of guns by ( Y A – Y B).)
The ratio shows how many guns it costs on average to produce an additional ton oils, all other things being equal... The convexity of the production opportunity curve away from the origin means that with an increase in the volume of oil production, each additional ton of it requires the abandonment of the manufacture of more and more guns.
This is due to the fact that with the redistribution of labor and material resources from the production of guns to the production of oil, the production of oil receives resources that are less and less adapted for this production. In other words, the additional labor redistributed into oil production from the production of cannons has a lower productivity than that already employed in this production.
The points of intersection of the curve of production possibilities with the coordinate axes show the maximum volumes of production of oil or cannons, respectively. for a given volume of production of all other products.
Point V(within the capacity curve) depicts a combination of oil and cannon production that does not achieve full utilization of production capacity. With such a combination, it is possible to simultaneously increase the production of both types of products, for example, by switching to a combination A... In this case, an increase in oil production does not require a reduction in cannon production, and the "opportunity cost" has not been determined, although an increase in both oil and cannon production requires additional resources.
Point G(outside the production possibility curve) corresponds to a combination of production volumes that is not achievable under the given conditions. To achieve it or come close to it, it is necessary to reduce the production of any other products.
If the production volumes of all other products are unchanged, then the increase in production possibilities can be represented by a shift of the production possibilities curve to the right upwards.
It is important to understand that the graph of the production capability curve for any two products, including oil and guns, not uniquely specified, but depends on what are production volumes of all other goods... Therefore, an arbitrarily large number of different graphs of this curve can be constructed, corresponding to different options for the distribution of social labor between different products. The curves of production possibilities have no practical application and are used only for educational purposes.
In a simplified form, the problem of economic choice can be shown using a production opportunity curve. Production capacity is the maximum possible production of goods with the full and efficient use of resources and available technology.
All points on the production capability curve show full and efficient use of resources. Points outside the production curve indicate that such output cannot be achieved with a given amount of resources and technology, for example, point F. All points within the production opportunity curve indicate an underutilization of resources, for example, point K.
If the population is at point C (produces 3 units of investment goods and 8 units of consumer goods) and wants to increase the production of investment goods, then it will be necessary to take some of the resources from the production of consumer goods to the production of investment goods. As a result, the production of consumer goods will decrease by 2 units, and the production of investment goods will increase to 4 units (point D). Opportunity (imputed) cost is the amount of one good that had to be sacrificed in order to obtain an additional unit of another good. The opportunity cost of producing an additional unit of investment goods is equal to two units of consumer goods.
Production Capability Curve convex... To increase investment output, it is necessary to sacrifice more and more consumer goods. This reflects the law of increasing opportunity costs: with an increase in the output of a given good, the opportunity costs of its production increase. This law is explained by the fact that resources are not completely fungible. For example, some workers may be specialized in the production of consumer goods and when they are transferred to the production of investment goods, their productivity decreases.
If the amount of resources in a country increases or technology improves, then the production capacity of the economy grows and the production capacity curve shifts to the right.
