Opportunity Cost- this is the benefit from the best of unrealized alternative possibilities.
Opportunity costs occur wherever a rational decision must be made and there is a need to choose between available options.
Examples opportunity costs a great many can be cited. Every person is faced with the need to make a choice between available options every day. For example, a person comes to a restaurant and is forced to choose between a steak, which costs $10, and salmon, which costs $20. By choosing the more expensive salmon, the opportunity cost would be two steaks that could have been purchased with the money spent. Conversely, if you choose a steak, your cost will be 0.5 servings of salmon.
Law of Increasing Opportunity Cost provides for an increase in the opportunity cost of producing each new unit of output as production increases.
Production, reproduction and economic growth. Production efficiency and its indicators. Factors for increasing production efficiency. Social division of labor and its forms.
Production- this is the starting point for the creation of material and intangible benefits.
Reproduction- a continuously ongoing process of production of goods, during which the means of subsistence, their producers, and production relations between the participants in this social process are renewed (reproduced).
The economic growth is the ability to produce more output as a result of increased supply of resources and technological progress.
The most important factor intensive economic growth - increased labor productivity. PT=P/T, P-created product in kind or monetary terms; T-cost per unit of labor; PT-labor productivity.
Economic efficiency- this is the achievement of the greatest results at the lowest cost per unit of production.
Indicators economic efficiency(private):
1. Labor productivity=result/cost of living labor.
Reciprocal there is a labor intensity of production:
Labor intensity=time expenditure/result.
2. Material output = result/material costs.
The reciprocal of this is material intensity:
Material intensity=material costs/result.
3. Return on assets = result/funds used (capital).
The reciprocal value is capital intensity.
Capital intensity = cost of used fixed assets/result.
1) product profitability, which is determined by the ratio of net profit to production costs;
2) profitability of production, which is determined by the ratio of net profit to the value of fixed production assets or to the cost of capital of the enterprise;
3) improving product quality.
Product profitability can be determined by the following formula:
EP = PE/(T+M+ UV), where EP is production efficiency;
PE - a pure product, taking into account its composition and quality;
T - costs of living labor;
M - current costs of materialized labor;
F - one-time investments in production assets;
Y is the coefficient of reduction to a single dimension, which allows summing up costs and investments.
Factors for increasing production efficiency:
Scientific and technical (acceleration of scientific and technical progress, automation, robotization, application of resource-saving technologies);
Organizational and economic (specialization and cooperation of production, rational distribution of productive forces, economic methods of managing economic activities);
Social and psychological (humanization of production, educational and professional level of personnel, formation of a certain style of economic thinking);
Foreign economic (international division of labor, mutual assistance and cooperation between countries).
Division of labor is the principle of organizing production in the economy, according to which individual engages in the production of a particular good.
There are: general division of labor, which refers to the identification of large types of activity (agriculture, industry, etc.); private- division of these genera into types and subspecies (construction, metallurgy, machine tool building, livestock breeding, plant growing, etc.); single- division of labor within a single enterprise.
As emphasized earlier, society strives to most fully satisfy the virtually unlimited needs of its members through the efficient use of relatively scarce resources. Therefore, a choice must be made between alternative uses of limited resources. If the economy is on the production possibilities frontier, the choice is constantly between maximum volumes production of various goods, in our example between the production of machine tools and oil.
However, in real life the commodity producer is most often in a position below the production possibilities frontier, in our example at point U, which indicates the presence of a reserve of resources for a simultaneous increase in the production of machine tools and oil. In such a situation, the number of alternatives increases significantly and they are not associated, as on the production possibilities frontier, with the growth of one product at the expense of the absolute loss of another. A different situation arises here, since, firstly, there is a reserve of resources to expand production, and secondly, the presence of a reserve allows you to simultaneously increase the production of both machine tools and oil.
All this complicates the selection process optimal option production, but each option chosen still makes the other options impossible. The only difference is that if on the production possibilities frontier we were talking about the inevitable loss of some result, now we are talking about a loss that might not have happened. Obviously, such a loss will be the greatest benefit of those that the commodity producer is forced to refuse to receive for the sake of the chosen, greatest benefit. By sacrificing all other alternatives, including the best one, a given subject can implement the most profitable option for economic action. Consequently, the costs of obtaining a given product (machines) will be the alternative goods not received (oil). Economists call the amount of one good that must be sacrificed to increase the production of another good. alternative (opportunity) costs production of that good or opportunity cost. In our example, the opportunity cost is the number of machines that must be given up in order to obtain additional oil. By alternative (imputed) costs, economics does not understand the actual consumption of resources (this would be the actual, real costs of production), but the potential loss of those goods that could have been produced from the resources used. This understanding of costs is incomprehensible to non-economists. The actual costs incurred are understandable, but to consider as costs, losses, what is not produced, but which could have been produced from the same resources if they were used differently - such an understanding of costs is inherent only to an economist.
Let us note that an economist defines costs as losses of other, alternative goods that could have been produced, while an accountant records as costs the monetary costs of resources necessary for the production of goods. The first approach is often called economic, and the second – accounting. If in the first case we are talking about opportunity costs, then in the second case we are talking about production delays. In addition, the economist strives to take into account all the benefits sacrificed to the implementation of this action. He may, for example, find out the profits of a rejected alternative investment project, whereas an accountant would not normally do this. The possibility of monetary expression of results and costs makes it possible to calculate the expected profitability per unit of resource expenditure in any alternative. With this calculation method, all opportunity costs become “reduced”, comparable, which makes it possible to determine the maximum profitability per unit of expenditure in each option. Thus, participants in a market economy acquire the opportunity to choose the optimal option for alternative (opportunity) costs.
Thus, opportunity costs are the benefits from the best of the unrealized alternative possibilities. Taking into account alternative (opportunity) costs when making economic choices is one of the most important methods of micro economic analysis. Understanding opportunity costs helps in further studying explicit and implicit costs, normal, economic and accounting profits.
Law of increasing opportunity costs. We have already emphasized that with existing production reserves
Fig.4.4. Opportunity Cost Curve
resources and the specific level of development of technology for their processing into necessary goods, it is possible to increase the production of one alternative product only by reducing the production of another. Let's simplify the example and take the production of two goods A and B (Fig. 4.4).
From Fig. 4.4. it is clear that when moving to the production of a larger quantity of product A, the alternative costs of each additional quantity of this product are the additionally unproduced quantities of product B. In our example, with the additional production of A 2 - A 1, the alternative costs will be the quantity B 2 - B 1. With a consistent transition to ever-increasing production of product A, we will find that opportunity costs increase. The reason for the increase in opportunity costs lies in the specific nature of the resources used. The fact is that not all of them are interchangeable and can be painlessly removed from one production and transferred to another. First, a rational commodity producer uses the resources most suitable for another type of production, and then, as it increases, it will be forced to switch to resources that are less and less suitable for this in conditions of their limitation. Consequently, specific economic resources can only be partially, to a certain and decreasing extent, used for an alternative type of production. Consequently, in conditions of limited and specific resources, opportunity costs will steadily increase as the output of any alternative type of product increases. This phenomenon is called law of increasing opportunity costs.
Opportunity Cost
Opportunity cost is “what you have to give up to get what you want.” It is not for nothing that opportunity cost is often called opportunity cost. So, in the example under consideration, the production of 4 thousand aircraft means a refusal to produce 10 million cars.
Of course, in real life, missed opportunities are not limited to one or even two types of products that have to be abandoned, they are numerous. Therefore, when determining opportunity cost, it is recommended to take into account the best real opportunity lost. Thus, when studying at a full-time university after school, a girl misses the opportunity to work during this period as a secretary (and not as a loader or watchman) and receive an appropriate salary. Wage secretary and will be for her the alternative cost (opportunity costs) of studying for full-time department university Opportunity costs in Russia are often called opportunity costs, and opportunity costs are called imputed costs.
Let us pay attention to the fact that as the production of a good increases, its opportunity cost increases. So, in our example, the production of 1 thousand aircraft requires the abandonment of the production of 1 million cars, 2 thousand aircraft - already 3 million cars, 3 thousand aircraft - 6 million cars, and for the production of 4 thousand aircraft it is necessary to completely abandon from the production of cars, i.e. For every additional thousand aircraft produced, more and more cars must be scrapped. We can say that the opportunity cost of the first thousand aircraft is equal to 1 million cars, and the opportunity cost of the fourth thousand aircraft is already 4 million cars. In other words, for each additional unit of a product produced, more and more of another, alternative product must be sacrificed. The reasons for the growth of opportunity costs lie primarily in the incomplete interchangeability of resources.
The increase in opportunity costs as each additional unit of output is produced is a known, tested and taken into account in economic life pattern. Therefore, this pattern is called law of increasing opportunity costs.
An even more well-known law, closely related to the above, is law of diminishing returns (productivity). It can be formulated as follows: a continuous increase in the use of one resource in combination with a constant amount of other resources at a certain stage leads to a cessation of growth in returns from it, and then to its reduction. This law is again based on the incomplete interchangeability of resources. After all, replacing one of them with another (others) is possible up to a certain limit. For example, if four resources: land, labor, entrepreneurial abilities, knowledge - are left unchanged and a resource such as capital is increased (for example, the number of machines in a factory with a constant number of machine operators), then at a certain stage a limit comes, beyond which further growth of the specified production factor is getting smaller. The effectiveness of the machine operator servicing all larger number machine tools, the defect rate is decreasing, increasing, machine downtime is increasing, etc.
Let's assume that in farming Wheat is grown. An increase in the use of chemical fertilizers (with other factors remaining constant) leads to an increase in yield. Let's look at this as an example (per 1 hectare):
We see that, starting with the fourth increase in the production factor, the increase in yield, although it continues, is in ever smaller amounts, and then stops altogether. In other words, an increase in one production factor while others remain unchanged at one stage or another begins to fade and ultimately comes to zero.
The law of diminishing returns can be interpreted in another way: the increase in each additional unit of production requires, from a certain point, an increasingly greater expenditure of economic resources. In our example, to increase the wheat yield by 1 centner, 0.2 bags of fertilizers are first required (after all, one bag is needed to increase the yield by 5 centners), then 0.143 and 0.1 bags. But then (with an increase in yield over 42 centners) the cost of fertilizers begins to increase for each additional centner of wheat - 0.111; 0.143 and 0.25 bags. After this, an increase in fertilizer costs does not increase the yield at all. In this interpretation the law is called the law of increasing opportunity costs (increasing costs).
The law of increasing opportunity costs is a law that reflects the relationship between increasing the production of one product at the expense of reducing another. In conditions of limited one of the resources and declining profitability, when society is on the production possibilities frontier, in order to increase the production of one of the goods, it will be necessary to reduce the production of another in an ever-increasing amount.
The increase in opportunity costs as each additional unit of output is produced is a known, tested and taken into account in economic life pattern. Therefore, this pattern is called the law of increasing opportunity costs.
An even more well-known law, closely related to the above, is the law of diminishing returns (productivity). It can be formulated as follows: a continuous increase in the use of one resource in combination with a constant amount of other resources at a certain stage leads to a cessation of growth in returns from it, and then to its reduction. This law is again based on the incomplete interchangeability of resources. After all, replacing one of them with another (others) is possible up to a certain limit. For example, if four resources: land, labor, entrepreneurial abilities, knowledge - are left unchanged and a resource such as capital is increased (for example, the number of machines in a factory with a constant number of machine operators), then at a certain stage a limit comes, beyond which further growth the specified production factor is becoming less and less. The productivity of a machine operator servicing an increasing number of machines decreases, the percentage of defects increases, machine downtime increases, etc.
Let's say that a farm grows wheat. An increase in the use of chemical fertilizers (with other factors remaining constant) leads to an increase in yield. Let's look at this as an example (per 1 hectare):
|
Quantity of fertilizers, bags | ||||||||
|
Wheat harvest, centners | ||||||||
|
Yield increase, c |
We see that, starting with the fourth increase in the production factor, the increase in yield, although it continues, is in ever smaller amounts, and then stops altogether. In other words, an increase in one production factor while others remain unchanged at one stage or another begins to fade and ultimately comes to zero.
The law of diminishing returns can be interpreted in another way: the increase in each additional unit of production requires, from a certain point, an increasingly greater expenditure of economic resources. In our example, to increase the wheat yield by 1 centner, 0.2 bags of fertilizers are first required (after all, one bag is needed to increase the yield by 5 centners), then 0.143 and 0.1 bags. But then (with an increase in yield over 42 centners) an increase in fertilizer costs begins for each additional centner of wheat - 0.11; 0.143 and 0.25 bags. After this, an increase in fertilizer costs does not increase the yield at all. In this interpretation, the law is called the law of increasing opportunity costs (increasing costs).
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Opportunity costs (costs), or the price of choice- this is the amount of goods that must be given up in order to obtain another good. The opportunity cost of increasing one good is determined by reducing the output of another good. So that the price we are forced to pay for an increase in the quantity of one commodity is a decrease in the quantity of another which is sacrificed in favor of the first. Thus, the opportunity cost of a good is determined by the amount of another good that must be given up in order to purchase (receive) an additional unit of this good. the law of increasing opportunity costs (lost opportunities, additional costs), reflecting the property of a market economy that in order to obtain each additional unit of one good one has to pay with the loss of an ever-increasing amount of other goods, i.e. increase in missed opportunities. The effect of rising opportunity costs and lost opportunities when increasing the production of one product at the expense of another is explained by the fact that with the joint production of goods, rational use of resources is achieved. Law of increasing opportunity costs also rightfully called the law of increasing cost of replacing one good with another. By determining the opportunity costs of producers of a good, it is possible to establish a comparative advantage specific manufacturer in front of others. Comparative advantage- This is a comparison of the opportunity costs of producers of goods. The producer with the lowest opportunity cost of producing a good has a comparative advantage over other producers.
Production, reproduction and economic growth. Production efficiency and its indicators. Factors for increasing production efficiency. Social division of labor and its forms
Production: In an eco sense - the process of creation different types eco product. The concept of production characterizes a specifically human type of exchange of substances with nature, or, more precisely, the process of active transformation by people natural resources in order to create the necessary material conditions for its existence and development. Reproduction happens: individual - when it is considered within a household or business firm, and public, i.e. taken on the scale of the entire national economy. The reproduction process includes includes the following main elements:
· reproduction of means of production- replacement and repair of labor equipment worn out during the production process, construction of new buildings, structures, restoration of reserves of raw materials, materials, fuel, etc.;
· reproduction of labor force- constant restoration of physical and mental capacity employee to work, training a new generation of workers who have the necessary professional qualities, improving their qualifications;
· reproduction of economic and production relations, i.e. relations between people arising in the processes of production, distribution, exchange and consumption;
· reproduction of natural resources and human habitat. We are talking about the constant restoration of soil fertility, forests, maintaining clean air;
· reproduction of production results, i.e. social product.
Depending on the achieved volume of social product, the following types of reproduction are distinguished:
· simple reproduction, when the quantity and other parameters of the gross national product (gross domestic product) remain unchanged in the subsequent cycle (repetition of production in the same sizes);
· expanded reproduction, when the quantity and other parameters of the gross national product (gross domestic product) increase.
There are two main types of economic growth: extensive and intensive.
With an extensive type of economic growth, the expansion of the volume of material goods and services is achieved through the use of a larger number of direct factors: the number of workers, means of labor, land, raw materials, fuel and energy resources, etc., since the resources of society are not unlimited. An intensive type of economic growth is more preferable, in which an increase in the production of goods is achieved through a more advanced technical base, an increase in labor productivity, and a more efficient use of all factors of production.
To characterize the economic efficiency of production a number of private indicators are used to measure the effectiveness of the application individual species resources, among which the following should be highlighted: labor productivity = result / costs of living labor (this is a direct indicator); The reciprocal value is the labor intensity of products: time costs of living labor / result; material productivity = result / material costs; The inverse of this value is material intensity: material costs / result; capital productivity = result / cost of fixed production assets of the enterprise (industry).
The following factors for increasing production efficiency are identified: scientific and technical (acceleration of scientific and technical progress, automation, robotization, use of resource and energy saving technologies); organizational and economic (specialization and cooperation of production, improvement of labor organization, rational allocation of productive forces, economic methods of managing economic activities); socio-psychological (humanization of production , educational and professional level of personnel, the formation of a certain style of economic thinking); foreign economic (international division of labor, mutual assistance and cooperation between countries).
SOCIAL DIVISION OF LABOR - relative isolation various types economic activity people, the specialization of an employee in the manufacture of a product or the performance of a certain labor operation. There are: general division of labor, which means the separation of large types of activity (agriculture, industry, etc.); particular - the division of these genera into types and subtypes (construction, metallurgy, machine tool building, livestock breeding, plant growing, etc.); single - division of labor within a single enterprise. The global trend indicates that the division of labor within society and the associated forms of territorial, international division, production specialization will deepen and expand. The division of labor in an enterprise (single), on the contrary, with automation and electronicization, tends to be consolidated. This creates the prerequisites for overcoming the narrow specialization of the employee and integrating mental and physical labor. These and other processes associated with social division labor, contribute to economic growth and increase its efficiency.
12. Economic system of society: concept, subjects, structure. Criteria for the classification of economic systems.
Economic system- the totality of all economic processes, taking place in society on the basis of the property relations and economic mechanisms that have developed in it. In any economic system, production plays a primary role in conjunction with distribution, exchange, and consumption. In all economic systems, production requires economic resources, and the results of economic activity are distributed, exchanged and consumed. At the same time, in economic systems there are also elements that distinguish them from each other: - socio-economic relations; - organizational and legal forms of economic activity; - economic mechanism; - system of incentives and motivations for participants; - economic ties between enterprises and organizations. Formational approach. In accordance with the formational approach, the historical development of society comes down to the replacement of one socio-economic formation by another, more progressive one. Founders formational approach are Marxists. Currently formational approach does not find a wide range of supporters in scientific world. This is due to the fact that in a number of countries, primarily Asian, this classification is not applicable at all to the process of historical development. Moreover, a person with his needs and values remains outside the formational approach. All this leads to the search for new criteria by which to analyze social development. Staged approach. This approach arose within the framework of the historical school of one of the directions of economic thought of the 19th century in Germany. In the twentieth century, the theory of stages of economic growth was developed by the American scientist Walter Rostow. In his opinion, society goes through five stages in its development: traditional society (primitive technology, predominance Agriculture in the economy, the dominance of large landowners); transitional society (centralized state, entrepreneurship); shift stage (industrial revolution); maturity stage (HTP, urban dominance); stage of mass consumption (priority role of the service sector, production of consumer goods). The main factor in the development of society, according to supporters of the stage theory, is the productive forces. This concept is close in economic content to the theory of K. Marx. Civilizational approach The historical movement of society is considered as the development of various stages (cycles) of civilization.
13. Institutions: formal and informal. Economic institutions.
Formal institutions- a method of organized construction based on social formalization of connections, statuses and norms. Formal institutions ensure the flow of business information necessary for functional interaction. Regulate daily personal contacts. Formal social institutions are regulated by laws and regulations.
To formal social institutions relate: 1) economic institutions- banks, industrial institutions;2) political institutions- parliament, police, government;3 )educational and cultural institutions- family, college, etc. educational establishments, school, art institutions.
Informal institution based on personal choice of connections and associations with each other, presupposing personal informal service relationships. There are no rigid standards. Formal institutions rely on a rigid structure of relationships, while in informal institutions such a structure is situational in nature. Informal organizations create more opportunities for creative productive activity, development and implementation of innovations.
Examples of informal institutions- nationalism, interest organizations - rockers, hazing in the army, informal leaders in groups, religious communities whose activities contradict the laws of society, a circle of neighbors.
All economic agents - the state, private companies, citizens engaged in business, etc. - act according to certain rules. They show what can and cannot be done, how to build relationships with other economic agents. These rules are called institutions.
Institutes- these are the rules by which business entities interact with each other and carry out economic activity. (For example, this is the right of private property, or the procedure for opening and registering new company, or the procedure for obtaining a state license to develop an oil field)
14. The concept of property. Subjects and objects of property. Types and forms of ownership. Modern theories property. Property reform. Transformation of property relations in the Republic of Belarus.
Own- these are relations between people that express a certain form of appropriation of material goods, and in particular the form of appropriation of the means of production.
Under the subjects of ownership understand specific people (groups) who enter into property relations with each other. The subjects of property can be an individual, a group of people, or society as a whole.
Property object name those elements of the conditions of production and the results of human activity that are assigned by a given subject.
Forms of ownership and their evolution:
· communal - production of products in excess of needs and consolidation of it by inheritance, property inequality, disintegration of the community;
· slave ownership – appropriation of slave labor and means of production; slaves are the property of slave owners;
· feudal – production of a product within the natural economy of a feudal estate; exploitation of serfs;
· capitalist – hiring economically free labor, equality of property subjects;
· corporate – joint stock companies and companies;
· state.
Property reform may carried out in the form of nationalization, denationalization and privatization.
Nationalization is the transformation of an object, economic resource or enterprise from private property into the property of the state or the entire country.
Denationalization
Privatization
In economic theory, there are two types of property relations: private and public. Private characterizes this type of assignment ( social form production), in which the interests of an individual, social or other group dominate over the interests of the whole society, as a unity of various parts. Public property characterizes this type of appropriation in which interests are realized through their coordination.
In modern economic theory, a whole direction of economic analysis called neo-institutionalism has developed. One of the most famous theories in this direction is economic theory property rights.
Denationalization and privatization are processes of transfer of property from one form of ownership to another.
Denationalization is a set of measures to transform state property aimed at eliminating the excessive role of the state in the economy. As a result, most of the functions of economic management are removed from the state, and the corresponding powers are transferred to the enterprise level.
Privatization- one of the directions of denationalization of property, which consists in transferring it into private ownership of individual citizens and legal entities.
The Law of the Republic of Belarus “On denationalization and privatization of state property in the Republic of Belarus” emphasizes that privatization is the acquisition by individuals and legal rights ownership of objects owned by the state.
15. Ways to coordinate economic life: traditions, market, team.
Traditions are characterized by the fact that the economic behavior of people and the solution of all issues of society are carried out on the basis of the original survival instincts, customs, and traditions. Examples of such an economic system are human societies in the pre-state primitive communal period. IN modern conditions- tribes of Amazonian Indians, Australian aborigines, Africans.
The team is characterized by the fact that issues of production, distribution of resources and income are decided by the state. This economic system was distributed in ancient civilization Incas and Aztecs, in eastern despotisms, in the countries of the socialist camp. A centralized state system is characterized by a rigid vertical management hierarchy, which ensures the concentration of economic resources on the main task put forward by the state. Vertical hierarchy leads to a lack of horizontal connections and loss of efficiency at the grassroots level.
Market based on private property and solving economic problems based on the personal, private interests of each producer. Individual decisions are coordinated in a competitive market environment. As a result, economic power is widely dispersed. The market system promotes effective use resources and rapid economic growth, but leads to differentiation of society by income. Historically, the first type of economic organization of production was subsistence farming. A natural economy is one in which people produce products to satisfy their own needs, and not for exchange, not for the market. Its signs:
isolation, limited and fragmented production, slow pace of development
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