Factors differ from resources in that they are. How are factors of production different from inputs? Economic resources and factors of production: comparison
The source of production is the resources available to the state. Economic resources - a set of various elements of production that can be used in the process of creating tangible and intangible benefits. According to their role in the production process and structure, they are divided into groups:
- 1) natural - land, its subsoil, forests, waters;
- 2) material - all means of production created by human hands (tools and objects of labor), which are themselves the result of production and are in material form;
- 3) labor - economically active population of working age, with the ability to participate in labor activity;
- 4) financial (investment) - the totality of all funds, financial assets that the company has and is able to allocate them for the organization of production;
- 5) information - data necessary for the functioning, development and management of production.
Along with the concept of "resources of production" in the economic literature, the concept of "factors of production" is used. Resources include natural and social forces that can be involved in production. The concept of "factors" of production is used when the resources already actually involved in the production process interact with each other. Factors of production- these are the resources involved in production, which have a decisive impact on the possibility and results of production.
Marxist theory identifies two groups of factors of production. personal factor, which is considered the labor force - the totality of the physical and intellectual abilities of a person to work. In the process of production, there is consumption work force- that is work. Real factors - all means of production: means of labor and objects of labor.
IN classical political economy The main factors of production are land, labor and capital.
Earth - this is the general name of all natural resources given by nature and necessary for the implementation of the production process (deposits of minerals, arable land, forests, water, etc.). In the process of conscious activity, a person withdraws more and more natural resources, as a result of which global problem there was a violation of a significant part of the biosphere and hence the evolution of diverse forms of life, which leads to a deterioration in the quality of the environment and natural resources.
Capital as a factor of production - a set of benefits used in the production of goods and services. Capital appears in three main forms: natural-material; monetary, intellectual (knowledge, know-how).
Labor - purposeful activity of people to transform the substance of nature to create material and non-material benefits necessary to satisfy human needs.
Currently, they are distinguished as a special factor of production - entrepreneurial activity, which consists in the initiative of an entrepreneur on an innovative risk basis to combine three factors of production to create products in conditions of uncertainty and take responsibility for the results of production. Entrepreneurial abilities are one of the most important factors in the formation and development of an economy with a market economy mechanism.
On present stage Development of information as a factor of production is information that is processed and used in the process of analysis and development of economic decisions in management.
law of diminishing returns factors of production - an economic law stating that, beyond certain values of factors of production (land, labor, capital), an increase in one of these factors does not provide an equivalent increase in income, that is, income grows more slowly than the factor. The law of diminishing returns determines the relationship between production costs and output: it reflects the relationship between the release of additional output and a change in one factor of production, while the volume of other factors remains unchanged. Explanation of the meaning of the law of diminishing returns: additionally applied costs of one factor (for example, labor) are combined with an unchanged amount of other factors (capital and land). Consequently, new incremental costs produce less and less incremental output. The law of diminishing returns is valid only when one factor (or several factors) of production changes and the rest remain unchanged.
Resources (fr. resource - auxiliary means) are sources that ensure production. It should be noted that in economic theory along with the concept of "economic resources" the term "factors of production" is used. Their difference is that resources mean the economic potential of the country, and factors of production are those resources that are already involved in the production process. Traditionally, resources are divided into several types:
- natural resources, or land;
- labor resources, or labor;
- investment resources, or capital (including technology);
- entrepreneurial resources, or entrepreneurship (entrepreneurial talent, entrepreneurial ability);
- information; knowledge is a specific form of information.
Rice. 1.5.
Let's dwell on what has been said in more detail.
Earth as a factor of production, it covers all agricultural land and urban land allocated for housing or industrial development, as well as the totality of natural conditions (including as a storehouse of minerals) necessary for the production of goods and services.
Capital in the form of means of production and technologies, it contains all the benefits created by past human labor: buildings, structures, machine tools, machinery and equipment, tools, etc., i.e. anything that is used to produce and transport goods and services. This capital is also called physical, or real. Financial capital (stocks, bonds, bank deposits and money) does not belong to the factors of production, since it is not associated with real production, but acts as a tool for obtaining physical capital.
Work usually considered as activities associated with the expenditure of intellectual, professional, physical and other abilities of a person in the process of creating economic wealth. More ancient Greek philosopher and scientist Aristotle(384–322 BC) and other ancient thinkers considered labor the most important factor production. A similar approach was shared by the first economic school in the world - mercantilism. The physiocratic school attributed special importance to the land as an economic resource. Economist and philosopher, representative of classical bourgeois political economy Adam Smith(1723-1790) considered such economic resources as labor, land and capital. However, the most clear theory of the three factors of production (labor, capital, land) was developed by a French economist, a representative classical school political economy J. B. Say (1767–1832).
Entrepreneurial ability suggest the special capabilities of a person, consisting in his ability:
- organize the production and release of goods and services by combining all the necessary factors of production;
- make key decisions on production management and business conduct;
- risk money, time, labor, business reputation, since activity in the market is associated with great uncertainty, and the result is not guaranteed;
- be an innovator, i.e. introduce new technologies, new products, methods of organizing production (innovation)
Entrepreneurship as a resource is most effectively implemented in a liberal economy, where there are no excessive bureaucratic restrictions and there is a stable the legislative framework. The effect of entrepreneurship depends on the level of education, qualifications, and the abilities of those people who take the initiative to create a company and manage production.
One of the key economic resources at the present stage of development of society is information.
Information is the process of collecting, processing and disseminating knowledge that is necessary for the production and sale of economic benefits, doing business.
Knowledge - it is a collection of information in various fields, new data on innovative methods of using other resources. They are formed through the acquisition of education, upbringing, experience, through the purchase of licenses or patents. The carriers of this resource are qualified personnel in the field of management, sales and customer service, Maintenance goods. It is this resource that gives the greatest return in business. At the same time, unlike other resources, information, knowledge can be replicated and exist quite independently (for example, trade in patents, know-how, etc.). Now, none of the aspects of human life can do without knowledge. Therefore, many countries spend significant funds on the development of education, science and the expansion of information systems. Possession of reliable information necessary condition to solve the problems facing the economic subject. However, even complete information does not guarantee success (Fig. 1.6).
Rice. 1.6.
In a market economy, all the economic resources listed above are freely bought and sold and bring to their owners special (factorial) income:
- land - rent;
- capital - interest;
- labor - wages;
- entrepreneurial ability - profit.
Renowned German economist, sociologist and philosopher Karl Marx(1818–1883) singled out private And real factors of production, while the personal factor is work force as a person's ability to work, and the material factor of production means the means of production, which in turn consist of means of labor and objects of labor.
However, it should be noted that the above classification of factors of production is not strictly unambiguous. Resources are also usually divided into renewable and non-renewable, primary and secondary, monetary and material, etc.
The significance of individual resources varied depending on the development of the productive forces of society. Hence concepts such as pre-industrial economy where the main factors of production were nature and labor; industrial economy - capital in the form of money and means of production is of primary importance, post-industrial economy (information society) - the basis of production is information, intellectual resources, innovation economy, in which the leading factor is the innovative activity of the entrepreneur.
All economic resources or factors of production have one thing in common: they are scarce or available in limited quantities.
Due to the scarcity of productive resources, the volume of production of economic goods is also limited. Therefore, it is necessary to achieve the efficient use of scarce resources. Economic efficiency characterizes the relationship between the amount of resources sold in the production process and the resulting amount of a good. More product from a given amount of input means an increase in efficiency, in turn, a smaller amount of product from a given amount of input indicates a decrease in efficiency. Factors of production are in a certain ratio, they complement each other and replace each other. For example, if a firm purchases new sophisticated equipment, it must train its staff to use the equipment.
Interchangeability factors of production (alternative use) is due to the fact that an increase in the volume of production can be provided by various combinations of resources - an increase in either the amount of labor, or capital, or land, or knowledge. For example, scientific and technical knowledge is used when it is necessary to use natural resources more rationally, technological knowledge provides an increase in the level of equipment operation, and, say, managerial knowledge allows for a more rational organization of the production of goods and services.
Substitution And complementarity factors of production characterize the model proposed by the American economist P. X. Douglas(1892–1976) and American mathematician Ch. Cobb known as the Cobb-Douglas model.
This simple model is based on the use of two factors of production: labor and capital and looks like this in a simplified way:
Q=f (L, K),
Where Q - volume of production; f – function; L- the amount of labor (labor force); TO - amount of capital.
The production function determines the maximum volume of output that can be obtained by realizing certain inputs of resources (labor, capital, land):
Q=f (L, K, N).
Since the production function shows the maximum amount of output that can be produced, it describes the results of using opportunity costs.
The interchangeability of factors of production cannot be complete. For example, labor resources are not able to completely replace capital and natural factors. Economic resources are mobile, i.e. can move in space. However, the degree of resource mobility is different. Natural resources are the least mobile, and labor resources are the most mobile, migrating not only within the territory of a particular state, but also beyond its borders. Business, capital and information are also mobile. The entrepreneur just looks for the most rational combination of resources, using their interchangeability.
In a market economy, each resource has its own market, which is characterized by the specifics of supply and demand. In these markets, the incomes of the owners of resources - labor, capital, land (wages, profits, interest, rent) are formed. At the same time, household incomes become expenses of enterprises (firms) for the acquisition of labor, capital or land. In turn, enterprises use the factors of production owned by households, producing economic goods. By realizing economic benefits to households, enterprises receive income, and households incur expenses, satisfying their needs for economic benefits. Thus, the relationship between subjects and objects of the economy is carried out on the basis of circulation of goods And income. Since the main subjects of the economy are households and firms, this circuit can be represented in the form of a diagram (Fig. 1.7).
Economic benefits and resources have a quantitative and qualitative assessment. To quantitatively reflect economic benefits, resources and phenomena, the concept is used economic indicators. Economic indicators used to characterize economic reality with the help of numbers have a number of features. For example, they can be measured in units over a certain period of time, i.e. they have dimensions flow, or measure at a point in time, i.e. have dimension stock. At the same time, the availability of funds makes it possible to evaluate most of the indicators in terms of value. However, there is a certain drawback inherent in the modern monetary system. This is inflation, which finds its expression in the rise in prices for goods and services. As a result of this fact, there is a need to regulate price indicators, while taking into account the distorting effect of inflationary processes on them. Hence the concepts of nominal and real values.
Rice. 1.7.
Nominal indicators it is customary to denote cost values that do not take into account price deviations as a result of inflation. They characterize cost economic indicators in current, current prices. Real values - values cleared of the effect of price changes. So, they distinguish between nominal and real wages, nominal and real GDP, and so on. Nominal wages are money wages, and real wages are the amount of goods and services that can be purchased with nominal wages. Obviously, real wages depend on nominal wages and the price level. Nominal GDP reflects the physical volume of goods and services produced during the year at current (i.e., current in that year) prices, while real GDP is nominal GDP adjusted for price changes or expressed in base year prices. The base year is the year from which the measurement begins or against which the GDP is compared. There are many such examples.
To recalculate nominal values (in current prices) into real values (in constant or comparable prices), use price level. The change (movement) of the price level is reflected using price indices (price indices). In international practice, indexes are usually denoted by symbols i And I (the initial letter of the Latin alphabet index ): i denote individual (private), I – common indices; 0 - basic; 1 – current (reporting) periods. In addition, certain symbols are used to designate indexed indicators: Q - the quantity (volume) of any product in physical terms; R – unit price
When counting price shifts Generally, two methods are used. One of them is based on the use index (formulas) of a German economist and statistician E. Laspeyres(1834–1913) – prices of the current period are compared ( p1 ) and basic (р 0 ) for the same set of goods (product basket) ( Q0 )
The Laspeyres formula shows how much a fixed basket of goods becomes more expensive in the current period:
( 1. 1)
Another method relies on the use of the index (formula) of the German economist Herman Paasche (1851 – 1925).
Paasche price indices show how much a fixed commodity basket of the current period is more expensive or cheaper than in the base period:
Where p1 ,p0 – prices of the studied (current) and base periods; Q1 , Q0 - the number of goods sold during these periods.
This indicator is commonly known as GDP deflator. Represents a relationship nominal GDP at market prices of the current year to real GDP at base year prices. Using the GDP deflator, which is better suited to measure the general price level, real GDP is determined by dividing nominal GDP by the GDP deflator:
Real GDP = Nominal GDP / GDP Deflator.
The GDP deflator measures the intensity inflation or reverse process deflation. Depending on whether the general price level rose or fell between the base year and the current year, nominal GDP can be either higher or lower than real GDP. If during this period the general price level increased, those. GDP deflator > 1, then real GDP will be less than nominal. If, however, during the period from the base year to the current price level has decreased, i.e. GDP deflator< 1, то реальный ВВП будет больше номинального.
However, it should be borne in mind that the Laspeyres index does not take into account the effect of substituting goods that have risen in price with relatively cheaper ones and thereby overestimates the increase in the price level.
At the same time, the Paasche index takes into account this factor, but does not take into account the decrease in the level of well-being caused by the rise in prices, and therefore underestimates the increase in the price level.
To more adequately reflect the dynamics of the price level, the index of the American economist is calculated Irving Fisher(1867–1947), which partly eliminates the shortcomings of the Laspeyres and Paasche indices by averaging their value:
Fisher index,
Where I L , Iр are the Laspeyres and Paasche indices.
The conditions under which economic processes take place differ in time, space or otherwise. Therefore, the terms "ex ante" and "ex post" can be matched.
Ex ante - preliminary assessment is aimed at assessing the situation or results in the future. Pre-assessment is often referred to as predictive.
ex post – actual or final assessment, as a rule, is carried out after the completion of any process.
For example, the ex ante demand might be planned demand, and ex post demand is what is realized, or actual the amount of demand. It is obvious that plans and the results of their implementation are not the same thing, since expectations are not necessarily realized. Therefore, ex post and ex ante variables do not always coincide.
plays an important role in the analysis time factor. This is due to the fact that the value of goods for people today and in the future is different. Whether or not there is inflation in the economy, people tend to place more value on today's goods than on future ones. Today's assessment of future economic performance occurs through discounting. Discounting - it is the process of bringing the economic indicators of future years to their present value.
The discounting operation is carried out, for example, when choosing investment projects when it is necessary to compare today's investments with future incomes, or when bringing the indicators of flows and stocks to a single dimension (for more details, see Chapter 5).
It is possible to create spiritual and material wealth using resources and factors of production. These categories are extremely important in economic theory. Production resources are nothing more than a set of financial and material resources, social, spiritual and natural forces used in the process of creating services, goods, and other values. Here are the varieties of economic theory divides the resources of production:
The first group is natural. This refers to substances and natural forces that are potentially suitable for further use in production. Among them there are "exhaustible" and "inexhaustible".
The second group is material. These are all that were created by man and in themselves are the result of production.
The third group is labor. This includes the population of working age. In this aspect, it is evaluated according to some parameters: cultural and educational, professional qualification and socio-demographic.
The fourth group is financial. implied cash allocated to the organization of production.
As technology moved from pre-industrial to post-industrial, so did the importance of resources. Previously, the priorities were labor and now - information and intellectual.
Three groups of resources that are inherent in almost any production are called basic - these are labor, material and natural. But the financial ones, which arose only at the "market" stage, are called derivatives.
But this is not the only classification of production resources. Other scientists propose to divide them into three groups: the first - general, the second - specific and the third - interspecific. General - these are those whose value does not depend on whether they are in a given company or not. Specific - their value outside the firm is much lower than inside it. And interspecific - mutually unique, complementary resources and their maximum value is achieved only in a particular firm and exclusively through it.
Resources and related concepts. But they also have differences. Earlier it was noted that resources are those natural, social, material forces that can only be involved in production. And factors are one of the economic categories, which denotes the resources already involved in the production process itself. Thus, resources and factors of production are close concepts, but the concept of "resources of production" is broader than the concept of "factors of production". That is, the factors of production are the producing resources.
Resources and factors of production have their own classifications. The first was discussed above, but the second:
1. Land - this is the name of natural goods that are customarily used in the process of any production. They can be forest, air, and so on. Land is considered a limited resource, so it is customary to charge a fee for it, called rent.
2. Labor is the mental and physical effort used by people in the process of producing services and goods. People realize their ability to work for a separate payment, called wages.
3. Capital - it is usually spent in the production process. Therefore, the capital is provided for use also for a separate payment, which is called "interest on capital."
4. Entrepreneurship. Its main task is to bring together within the framework of capital, labor and land. And for the efforts and risks that are invested in a business, he receives a fee or, in other words, a profit.
The factors of production can actually be disposed of, owned or used by the state, firms or individuals.
2. Economic resources and factors of production
Economic resources are understood as all types of resources used in the process of production of goods and services. In essence, these are goods that are used to produce other goods. Therefore, they are often called production resources, production factors, production factors, production factors. economic growth. In turn, the rest of the goods are called consumer goods.
Productive resources are all natural, human and man-made resources that are used to produce economic goods. They are divided into three groups according to their characteristics: origin, role in production, mobilization mechanism.
These three groups are called economic resources.
Economic resources include:
Natural resources (land, subsoil, water, forest and biological, climatic and recreational resources), abbreviated as land. Land - everything that can be used by a person in production in a natural state, without preliminary processing: fertile land, a place for construction, forest, mineral resources;
Labor resources (people with their ability to produce goods and services), abbreviated as labor.
Labor is all the mental, physical, mental, emotional costs of people in the production process. An indicator of the effectiveness of its use is labor productivity, i.e. the degree of fruitfulness of the expedient activity of people. The growth of labor productivity is manifested: firstly, in an increase in the amount of products created per unit of time, secondly, in a reduction in the cost of all production resources per unit of output, thirdly, in an increase in the role of capital in production compared to labor and land, in growth specific gravity capital costs in total production costs;
Capital (in the form of money, i.e. money capital, or means of production, i.e. real capital). Capital - all means of production created by people, including raw materials, semi-finished products, tools, industrial equipment, infrastructure. It is something through which man influences nature. When characterizing capital as an economic resource, it should be taken into account that there are several interpretations of capital in economic theory:
Physical capital (this is an economic resource) is a stock of production goods created by the economy for the production of other goods.
Monetary capital (not an economic resource) - money put into circulation, securities (stocks, bonds ...), any financial assets.
Human capital is the accumulated knowledge and experience of a person, allowing him to receive a higher income ( special form labor factor).
Common in all interpretations: capital is something that is put into circulation, returned to the owner on an increased scale (with profit, with wage increases, with a dividend).
Entrepreneurial abilities (the ability of people to organize the production of goods and services), in short - entrepreneurship;
Knowledge necessary for economic life.
Even Aristotle, and after him, medieval thinkers considered labor to be one of the main economic resources. A similar approach was shared by the first economic school in the world - mercantilism. The physiocratic school attributed special importance to the land as an economic resource. Adam Smith considered such economic resources as labor, land and capital. However, the theory of the three factors of production was formulated most clearly by the French economist Jean-Baptiste Say (1767-1832). The English economist Alfred Marshall (1842–1924) suggested adding a fourth factor, entrepreneurial ability. Many modern economists are inclined to believe that now the “knowledge” factor has come to the fore in terms of importance as a factor in economic growth, calling it differently - technology, scientific and technological progress, science, information.
3. Limited resources and the choice of alternatives for the use of resources
All material resources, both natural and man-made, are limited. Indeed, when it comes to those resources that can be involved in production, there is a problem of limited arable land, mineral deposits, forest land, lakes and rivers suitable for fish farming. The use in the production of machine tools and tools of the required assortment and quality, adequate to the needs of the production of technological characteristics, computers of the necessary productivity, software tools that can effectively replace a person in production is also limited. Despite the widespread development of vehicles, every entrepreneur feels a certain lack of them for the purposes of their activities.
The factor of limitation also takes place in relation to human resources. Indeed, despite high level unemployment, in the periodical press are constantly published announcements of invitations to work, competitions for vacancies. This means that, along with the problem of employment, there is a shortage of certain types of labor resources. For example, given that graduates Pedagogical Institute are not employed, there is an acute shortage of teaching staff in urban schools.
Lack of people capable of civilized entrepreneurial activity is especially acute in our economy. This is due to the absence, or rather, the oblivion of domestic entrepreneurial traditions, the insufficient qualifications of people who have gone into business, and the legal, economic, and socio-political environment that is inadequate to the needs of modern business.
Along with limited, economic resources, there are benefits that are not limited, distributed and appropriated by certain people ( atmospheric air). Such resources, in contrast to economic ones, are called free.
Considering that society's resources are limited, the question of production possibilities arises, that is, the problem of technological choice, deciding what goods and in what quantities to produce in order to satisfy social needs to the maximum extent. To this end, it is necessary to use all available resources and opportunities.
Resource scarcity is not absolute, it is always relative. Thus, the available developed resources of a certain economy always depend on:
The magnitude of labor resources, acting as a direct consequence demographic situation in society;
The magnitude of the means of production, including land, functioning in the process of social reproduction.
The value of the means of production functioning in the process of social reproduction is determined by the technological mode of production prevailing at the given stage of development of the economic system. It is the technological mode of production that is the limiter for the involvement of additional resources in the process of social reproduction. Thus, changes associated with an increase in the level of labor productivity in an enterprise due to technological changes, as a rule, result in an increase in the volume of production, which would previously have required a significant increase in the number of employees. In this case, for the enterprise (and for society) there has been a change in the value of such economic resources as labor and means of production.
Resources are the material embodiment of the needs of social reproduction, and their limitation is relative, it can only be discussed within the framework of a certain mode of production.
Resources are intertwined. For example, such an economic resource as knowledge is used when natural resources tend to be consumed more rationally based on new knowledge (scientific achievements). Knowledge is an important element of such a resource as labor, when it is evaluated from a qualitative point of view and attention is paid to the qualifications of workers, which depends primarily on the education (knowledge) they have received. Knowledge (primarily technological) provides an increase in the level of equipment use, i.e. real capital. Finally, they (especially managerial knowledge) allow entrepreneurs to organize the production of goods and services in the most rational way.
Economic resources are mobile (mobile), as they can move in space (within the country, between countries), although the degree of their mobility is different. The least mobile natural resources, the mobility of many of which is close to zero (land is difficult to move from one place to another, although it is possible). The labor resources are more mobile, which can be seen from the internal and external migration of the labor force in the world on a noticeable scale. Entrepreneurial abilities are even more mobile, although often they do not move on their own, but along with labor resources and/or capital (this is due to the fact that the carriers of entrepreneurial abilities are either hired managers or owners of capital). The last two resources are the most mobile - capital (especially money) and knowledge.
The interweaving of resources and their mobility partly reflect their other property - interchangeability (alternativeness). If a farmer needs to increase grain production, then he can do it this way: expand the sown area (use additional natural resources), or hire additional workers(increase the use of labor), or expand your fleet of machinery and equipment (increase your capital), or improve the organization of labor on the farm (make more use of your entrepreneurial abilities), or, finally, use new types of seeds (apply new knowledge). The farmer has similar choice because economic resources are interchangeable (alternative).
Usually this interchangeability is not complete. For example, human resources cannot completely replace capital, otherwise workers will be left without equipment and inventory. Economic resources replace each other easily at first, and then more and more difficult. Thus, with the same number of tractors, it is possible to increase the number of workers on the farm by requiring them to work in two shifts. However, it will be very difficult to hire more workers and organize systematic work in three shifts, except by sharply increasing their wages.
The entrepreneur (the organizer of production) constantly encounters and uses the indicated properties of economic resources. Indeed, in the conditions of limited resources, he is forced to find the most rational combination of them, using interchangeability.
An illustration of the interweaving and alternativeness of economic resources can be a simple one based on only two factors of production (the Cobb–Douglas model). It looks like this:
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relevant businesses. All of them create goods and services necessary for the life of people. The economy constantly produces two main kinds of wealth: commodities and means of production. The value of the economy for society is determined by the fact that it continuously provides it with consumer goods (food, clothing, housing and other useful things), without which it cannot ...
The formation of the information society, information itself is an unlimited economic resource; in addition, unlimitedness is also characteristic of such a resource as cognitive, creative work. Socio-economic needs as a driving motive for economic activity We can, in a certain sense, consider the entire history of the economy as the history of the formation of an ever higher ...
Thus, the factors of production for the production of a television set include: industrial premises, machine tools, machinery, equipment, labor of workers, a piece of land on which industrial buildings and structures are built, etc.
Depending on the speed with which the amount of resources involved in production can change, they are divided into fixed and variable. Those of them that remain unchanged for a certain period of time form fixed factors of production and those whose number varies - variable factors of production.
All production resources involved in the production process are available in limited quantities.. As a result, the volume of production of goods and services is limited by the amount of available resources. Therefore, society as a whole and each commodity producer in particular is always faced with the task of their most efficient use. Thus, the volume of goods produced is determined by the availability of the necessary resources. Moreover, various options for their use allow the producer to receive more or less goods or services. Therefore, the enterprise should be interested in ensuring the fullest use of labor, material and financial resources and their optimal combination.
Since the productive consumption of available resources is carried out in the production process, there is a functional relationship between the volume of production and the amount of consumed production resources. It can be expressed with production function. If the entire set of production resources is represented as the costs of labor, capital and materials, then the production function has the following form:
Q-f(L, K, M),
WhereQ - the maximum volume of products produced with a given technology and a given ratio of labor ( L), capital (TO) and materials (M) .
The production function allows:
- determine the share of participation of each of them in the creation of goods and services.
By changing the ratio of factors, one can find such a combination of them that will achieve the maximum volume of production of goods and services.
- trace how output changes with an increase or decrease in the use of certain factors of production by one unit, and, thus, identify the production capabilities of the enterprise.
- to determine the economic feasibility of the production of a particular product.
Note that the production function, as a rule, is calculated for a specific technology.
Technology - this is the practical use of technology, equipment, physical and intellectual capabilities of the enterprise personnel. Improvement in technology leads to new methods of production based on the use of new machines and equipment, as well as more skilled labor, which allows more products to be produced and therefore reflects a new production function. For various kinds industries (automobiles, agricultural products, confectionery, etc.) the production function will be different, but they all have the following common properties:
* there is a limit to the increase in production that can be achieved by increasing the cost of one resource, all other things being equal;
* There is a certain mutual complementarity (complementarity) of production resources and their interchangeability (substitution). The complementarity of resources means that the absence of one or more of them makes the production process impossible - production stops. At the same time, the factors of production are interchangeable to a certain extent. The lack of one of them can be compensated by an additional amount of the other, i.e. resources can be combined with each other in the production process in various proportions;
* a differentiated assessment of the influence of each of the factors on the dynamics of output is given in relation to certain periods of time.
The production function can be expressed graphically as isokwangpy - a curve that reflects the various combinations of resources that can be used to produce a given output. For example, the production of 1 ton of potatoes (Q) can be ensured by using a different combination of the amount of living labor (L) and technical means - capital (TO).
On fig. 8.1 shows an isoquant corresponding to production of 1 ton of potatoes. She shows what exists