Main factors of production 1. Factors of production in the economy. Production function and its factors
1.3.1 Factors of production – resources used in production, on which the volume of output largely depends. Factors of production include land, labor, capital, entrepreneurial activity ( entrepreneurial skills), as well as scientific and technological progress, knowledge, information, etc.
1.3.2 Market of production factors (resources) – the sphere of the economy in which their purchase and sale takes place and where, as a result of the interaction of supply and demand, prices for labor, natural resources, capital, and entrepreneurial ability are formed in the form of wages, rent, interest income, and profit.
1.3.3 Labor – the most important factor of production and the main source of income for the economically active part of the population.
1.3.4 Labor market – This is the sphere of contracts between sellers and buyers of labor services, as a result of which the price level and distribution of labor services are established.
1.3.5 Labor demand – the amount of labor that an employer is willing and able to buy at the market price of labor in a given period, other things being equal.
1.3.6 Salary in a broad sense – income from the factor of production “labor”. Wage in a narrow sense - the wage rate, i.e. the price paid for the use of a unit of labor for a certain time - hour, day, etc. Nominal wage - the amount of money that an employee receives for his daily, weekly, month's work. Real wage- a lot of life goods and services that can be purchased for the money received.
1.3.7 Marginal profitability of labor – additional income received from the use of an additional unit of labor:
Where – the firm's marginal revenue – ultimate performance labor.
When the marginal income of the product of labor is equal to the wage rate, the quantity labor resources will maximize the firm's profit (Figure 1.3.1):
Figure 1.3.1 – Marginal profitability of labor
1.3.8 The labor market has a number of features.
Only labor services are purchased in the labor market;
Compensation for labor is presented not only wages, but also additional benefits: medical care, official transport, meals at work, paid leave;
Labor contracts are multilateral agreements and include: content and working conditions, prospects for advancement at work, microclimate in the team and norms of subordination in management, the likelihood of maintaining a job;
All workers differ significantly from each other in many qualities, in particular abilities and preferences, and jobs differ in the required qualifications and working conditions;
When purchasing labor, the length of the seller's and buyer's contracts is essential;
Labor unemployment has significant human and economic costs to society;
The labor market has a large number of institutional structures representing the interests of the state, business, and trade unions.
1.3.9 Labor supply – the desire and ability of an individual to work a certain amount of time for a wage set by the labor market at the level of the alternative price.
Labor supply depends on the size of the population and its working age; individual preferences for the distribution of time between work and leisure; level and structure of wages. An individual's time in economics is divided into two categories: work and leisure. Individual labor supply is the process of maximizing utility from work and leisure (Figure 1.3.2).
Figure 1.3.2 - Individual labor supply
1.3.10 Earth – These are all the natural resources that humans use to produce goods and services.
1.3.11 Physical capital – These are the means of labor with which goods are produced and services are provided. These include: machines, machines, buildings, structures, supplies of materials, semi-finished products.
Capital and land can be purchased or leased for a period of time for a fee. In this case, the asset itself or its service is purchased.
1.3.12 Asset price – the price that must be paid to acquire ownership. Asset service price – cost of using the asset service; for real factors, the price of their service is determined by the rental valuation of the asset.
1.3.13 Rent – the total income received from the use of the services of a given asset. Rent is the income of the owner of the asset.
1.3.14 Absolute rent – part of the surplus value created by agricultural wage workers and appropriated by landowners of private land ownership; does not depend on differences in the fertility and location of individual plots and the productivity of additional capital investments in the same plot.
1.3.15 Differential rent – a form of land rent in the form of additional income received by the landowner due to the greater fertility of the land on his plot. There are differential annuities I and differential annuities II. Differential rent I associated with differences in fertility and location of land. Differential rent II represents additional profit arising as a result of successive investments of capital in land - carrying out reclamation work, applying fertilizers.
1.3.16 Land market – economic relationships and connections of its two main subjects: owners of land resources (landowners) and agricultural entrepreneurs (farmers).
The price of land depends on the price of land services. It is assumed that the earth – is a perpetual asset, so the following formula is used to calculate its price:
Where – price of land, – land service price (rent), – interest rate.
1.3.17 Capital market – a form of economic relationship between the seller of capital, who is the owner of capital assets, and the buyer, who is an entrepreneur who uses capital to organize the production process.
The minimum acceptable rental rate will be the following estimate:
Where – capital service price (rent), – interest rate, – the amount of initially invested capital, – depreciation rate.
1.3.18 Investments – these are the costs of the company necessary to provide the production assets through which goods and services are produced; This is money capital, which corresponds to a certain amount of physical capital.
1.3.19 Time factor in economics – an objective factor that must be taken into account when transferring different-time costs and production results to an economically comparable form.
1.3.20 Interest rate on investments – the percentage ratio between net income and invested capital.
There are two approaches to calculating income from investments:
1.3.21 Simple interest method provides for the payment of income at the end of the time period in the form of a constant percentage of the invested funds.
1.3.22 Compound interest method means that the income received in the previous time period is added to the initial capital and the income for the next period is accrued on the combined capital, or, in other words, the income from the previous period brings income in the current period.
1.3.23 Future value of a one-time capital investment – this is a project in which the investor invests free cash in volume for a period of years, while the result of the project will be – total interest and return on investment (Figure 1.3.3):
Figure 1.3.3 - Future value of a one-time capital investment
1.3.24 Future value of periodic payments represents the sum of the future values of a one-time capital investment in the number of terms shifted along the time axis by one year and returned at the end of the years (Figure 1.3.4):
Figure 1.3.4 - Future value of periodic capital investment
In case of more frequent accumulation, the formula is used:
where is the frequency of interest accumulation (if the addition of accrued interest to the principal amount of investment occurs once a quarter, then, if once a month, then ).
1.3.25 Current cost of a one-time payment – the reciprocal of the future value of a one-time capital investment; the current value of capital to be received in the future (Figure 1.3.5).
The formula for calculating the current cost of reversion is as follows:
Figure 1.3.5 - Current value of future payment
1.3.26 Financial rent (current value of periodic payments, annuity) is defined as a series of equal payments, the first of which is made one year from now (Figure 1.3.6).
Figure 1.3.6 - Financial rent
The formula for calculating financial rent is as follows:
1.3.27 Inwood factor – factor of the current value of the annuity, that is, the annuity for 1 ruble. The Inwood factor is calculated using the following formula:
1.3.28 Net present value (current, discounted) value represents the difference between discounted prices for the period life cycle of all estimates of the results obtained and costs is the root of the equation: .
1.3.30 Project payback period – the minimum value of time at which discounted results become equal to or begin to exceed discounted costs. The condition for a minimum payback period is necessary, but not sufficient for selecting a project for implementation.
1. Production and factors of production. Production function. Isoquant.
2. The company's activities in the short term. Law of Diminishing Returns ( marginal productivity factors).
3. Long-term production period. Isocosta. Producer Equilibrium
4. Costs of the company (enterprise). Cost structure, their types
5. Company income. Accounting and economic profit.
Production and factors of production. Production function.
Production - is the process of transforming production resources (factors of production) into a product. Factors of production are resources that are used to produce goods and services.
The production process is the interaction of many factors (resources) of production. Neoclassical theory identifies four groups of factors: labor, land, capital, entrepreneurial ability.
Factors in the production process are characterized by the following main features:
1. complementarity (complementary);
2. interchangeability (the ability to use various factors in various combinations and quantitative proportions);
3. interconnectedness.
Production theory studies, first of all, the relationship between the amount of resources used (factors of production) and the volume of output of goods.
Technological dependence between the amount of resources used (factors of production) and the maximum possible release products are called production function(PF). She describes many technical effective ways production.
PF, like any other function, can be written in the form of an equation, table, or presented as a graph.
For the sake of simplicity, we will assume that the firm produces one product and uses two resources: labor ( L) and capital ( TO).
Then economic activity firm can be described by the production function: Q
Each production method (technology) can be described by its production function.
Properties of the production function:
1) each production function characterizes a particular technology;
2) if technology changes, then the production function changes;
3) if at least one factor of production is missing, then production is impossible (Q = 0)
The graphical display of the PF is isoquant
– This is a curve on which all combinations of factors of production are located that give the same volume of output.
A graph showing a set of isoquants is called isoquant map .
Graphically each production method can be represented by a point, the coordinates of which characterize the minimum amount of resources required to produce a given volume of output L And TO, and the production function is line of equal output, or isoquant.
Isoquant or equal product curve – This is a curve on which all combinations of factors of production are located that produce the same output. Isoquants show flexibility of production decisions made by firms.
On isoquant Q1, for example, all combinations of factors of production are marked; use gives 55 units of product. Isoquants Q2 and Q3 lie to the right of Q1, since they provide greater output.
Properties isoquant:
1) have a negative slope. This means that when one factor of production is reduced, in order to maintain a constant volume of output, an increase in another factor is necessary.
2) concave towards the origin;
3) never intersect with each other. Crossover would mean that for the same combination of inputs the output could be different;
4) for any given volume of output, its own isoquant can be carried out;
5) the further to the right and higher the isoquant is located, the greater the volume of output it corresponds to
All different factors of production, used by the company in the production process, are conventionally divided into two classes: permanent And variables.
Resources, the number of which does not depend on output volume and is unchanged during the period under review, belong to the group permanent ( production areas (size of buildings and structures, plot of land occupied by the enterprise, etc.).
Resources, the quantity of which directly depends on the volume of output, are called variables (electricity, most types of raw materials, transport services, labor, etc.)
The division of production factors into constant and variable allows us to distinguish short-term and long-term periods in the activities of the company.
The period during which the firm is able to change only part of the resources (variables), while the other part remains unchanged (constant), is called short-term. In the short run, the firm's output depends solely on changes in the variable input.
The period during which a firm can change the quantity of all production resources it uses is called the long-run.
Let us consider in more detail the main patterns of production activity in the short and long term.
Related information.
Factors of production, their composition and nature. Fulfilling the main goal of enterprises - creating goods and services that satisfy people's needs, increasing profits involves combining and using factors of production, natural resources, labor and capital costs, measuring them with production results. In this case, both the method of combining factors, its mechanism, and the proportions of the relationship between them are important.
In Marxist theory, constant and variable capital are distinguished as factors of production; in a command-administrative system, production assets and labor are distinguished. Direct connection was expected production assets And work force through planned distribution across industries and areas of activity, and the main link in the mechanism for connecting labor with funds
production was distributed according to labor in accordance with its quantity and quality.
A different interpretation of factors of production is contained in Economics textbooks. It is based on the theory of three factors of production, put forward by the French economist J.-B. Say - land, capital and labor. Later, a fourth factor was added to them - entrepreneurship.
Earth - This includes all natural resources, “free benefits of nature”, which are used in production process, for example, arable land, forests, mineral deposits, oil, water resources, air.
Capital - it includes all released means of production, i.e. tools, machines, equipment, factories, warehouses, vehicles and other elements used in the production and delivery of goods and services to the final consumer. All these elements of capital are called investment goods as opposed to consumer goods that directly satisfy people's needs. It should be noted that in this case the term “capital” does not mean money. They act as financial capital and are not real capital and an economic resource.
Labor - this term is used to denote human activity, the use of the totality of physical and mental abilities of people to achieve any result. The work performed by a lumberjack, turner, baker, teacher, doctor, artist, scientist is characterized by general concept"work".
Entrepreneurial activity - special kind human resources, which consists in the ability to most effectively use all other factors of production. This factor is highlighted in Economics textbooks as special due to the fact that:
The entrepreneur takes the initiative to combine the resources of land, capital and labor into a single process of producing goods and services. It acts as a kind of catalyst for this process;
The entrepreneur takes on the difficult task of making decisions and the responsibility for their implementation;
An entrepreneur is an innovator;
An entrepreneur is a person who takes risks. 1
In the era of scientific and technological revolution, the so-called specific factors of production. These include information, science, technology, production, social infrastructure, the special importance of which is constantly increasing.
All factors of production have a number of properties: they are in constant development, interdependent and interdependent, and to a certain extent are interchangeable.
Interchangeability, substitution of production factors. In modern foreign neoclassical theory, the ratio of production factors and their returns are studied using the categories mutually factors, their replacement and production function. When determining the most efficient method of production, options for combining factors of production are determined using maximum rate of technological substitution one resource by another." It characterizes how much of another factor one unit of a given factor can be replaced to obtain the same volume of production. The replacement of labor with capital is usually studied (the release of workers from production based on the increasing use of machines). The marginal rate of technological substitution of labor with capital shows the amount of labor that can be replaced by a unit of capital.
The curve reflecting all possible combinations of resources is called isoquants(Fig. 1.2). Dot A corresponds to the most highly mechanized production method. At the point D shown option using large quantity manual labor.
The optimal way to combine factors of production is determined using production function:
Where Q - volume of products produced; L - labor costs; K sch consumed capital.
It shows the maximum output for each combination of factors of production.
Depending on the possibility of changing the amount of resources, resources are allocated long-term And short periods. In turn, the resources themselves (factors) are divided into constants, which cannot be changed in a given period of time, and variables. The optimal ratio of factors (labor and capital) is such that average And the marginal product of labor reaches its greatest its meaning. It also takes into account production costs and resource prices.
If we combine the isoquant and the isocost map on one graph, we will obtain a given volume of production with minimal costs (Fig. 1.3).
Isoquant at a point A touches the isocost at 12 monetary units. This means that the entrepreneur's costs for the acquisition of production factors will be minimal, provided that he acquires 3 units of labor and 2 units of capital. This combination of factors used minimizes costs for a given volume of output and at the same time maximizes the volume of production for a specified amount of costs. These provisions are used in determining economies of scale and the optimal size of the enterprise. Ultimately, this approach drives revenue and profit growth.
Production efficiency: economic and social ace pects. Among the general goals of social development, economic theory highlights high economic efficiency, which follows from limited resources. It is necessary to achieve maximum returns from all used resources at a minimum of costs. Ultimately, this is important for improving the living standards of the population.
What meaning do economists give to the concept of “efficiency”? This is primarily about production efficiency. Economy ical efficiency covers the problems of “input-output”, “results-input” and characterizes the relationship between the number of units of resources that are used in the production process and the resulting quantity of any product. A larger volume of product obtained from a given amount of input indicates increased efficiency; a smaller volume of product indicates a decrease in efficiency.
Performance criterion is a methodological approach to its measurement, taking into account the achievement of basic economic goals. It gives a qualitative characteristic of production efficiency. Performance indicator characterizes its quantitative side.
There are economic and social efficiency or production-economic and socio-economic. Production social and economic efficiency characterizes the effectiveness of resource use. At the macroeconomic level, this can be the value of product, income, profit per unit of total costs (resources).
To characterize production efficiency, a number of private indicators:
Labor productivity is the ratio of product to labor input;
Labor intensity - labor costs per unit of production;
Material efficiency - the ratio of the product to the amount of materials used;
Capital productivity is the ratio of the value of the product to the value of the fixed assets used;
Capital intensity is the number of funds per unit of production.
The most important indicators are labor productivity, material intensity and capital productivity.
Labor productivity can be calculated at the level of an individual worker, an enterprise, an industry, or an entire economy. The latter indicator determines the real standard of living of the population of a particular country. Consumers can increase their level of consumption in the long run only by increasing the total quantity of products produced.
The most important factor in labor productivity growth is the growth of accumulated capital and the introduction of new technologies. An increase in capital means quantitative and qualitative changes in equipment. Thanks to this, each worker gets the opportunity to produce more products per hour of work.
Labor productivity growth is also associated with the raw materials sector of the economy. As oil, natural gas, and other resources begin to dwindle, output per worker may decline.
Indicators of material and capital intensity, capital productivity characterize the efficiency of capital use. Their change is associated primarily with changes in the technical and technological level of production, as well as its organization.
Important indicators of production efficiency are product quality and production profitability.
Socio-economic efficiency characterizes the level of satisfaction of social needs. Indicators of social efficiency are consumption of products per capita, the amount of income, wages, provision of the population with educational, health care, cultural services, etc. Economic and social efficiency interact and condition each other, characterizing the economic and social progress of society.
In total increasing production efficiency The following factors contribute:
Scientific and technical - scientific and technological progress, automation, robotization, the use of resource-saving and high technologies, improving the structure of capital investments, etc.;
Organizational and economic - specialization and cooperation of production, rational placement of productive forces, system of organization and management of economic activities;
Social and psychological - educational and professional level of personnel training, the formation of a certain style of economic thinking, the moral and psychological climate in work collectives, the humanization of production;
Foreign economic - the level of development of the international division of labor, mutual assistance and cooperation between countries, the development of foreign trade.
2
.1
.
Factors of production
– 1) resources with the help of which the production of goods can be organized; 2) resources used in production, on which the quantity and volume of manufactured products largely depend; 3) factors used in the production of goods and services.
Factors of production = economic resources.
Economic resources
(from French. ressource – auxiliary tool) – fundamental concept economic theory, meaning sources, means of ensuring production.
Economic resources are divided into
: 1) natural (raw materials, geophysical), 2) labor ( human capital), 3) capital (physical capital), 4) working capital(materials), 5) informational resources, 6) financial (money capital). This division is not strictly unambiguous.
The production process is the transformation of economic resources (factors of production) into goods and services.
2.2
.
What are factors of production?
?
2.2.1.
Version No. 1: Factors of production = economic resources: 1) labor (the activity of people in the production of goods and services by using their physical and mental capabilities); 2) land (all types of natural resources available on the planet and suitable for the production of economic benefits); 3) capital (industrial building, machines, tools). No less important is another factor that connects all the others, 4) entrepreneurial abilities.
2.2.2.
Version No. 2: Factors of production = 1) labor + 2) means of production (natural resources + [produced resources = capital]).
2.2.3. Nowadays, another very specific type of production factors has acquired immeasurably greater importance than before - 5) information (knowledge and information that people need for conscious activity in the economic world). Possession of reliable information is a necessary condition for solving the problems facing an economic entity. However, even complete information is not a guarantee of success. The ability to use the information received to make the best decision under the current circumstances characterizes such a resource as knowledge. 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. “What distinguishes a strong company from a weak one is, first of all, the level of qualifications of its specialists and management staff, their knowledge, motivation and aspirations.
Besides the listed factors in the economy an important role is played by: 6) general culture; 7) science; 8) social factors(state of morality, legal culture).
2.3
.
Work- a set of physical and mental abilities that people use in the process of creating economic wealth.
Labor characteristics
: 1)
labor intensity
(labor intensity, which is determined by the degree of labor expenditure per unit of time); 2)labor productivity
(performance = labor productivity, which is measured by the amount of products produced per unit of time).
2.4
. Under " earth"Economists understand all types of natural resources. This group includes free benefits (???) of nature that are used in the production process: plots of land on which industrial buildings are located, arable land on which crops are grown, forests, water, and mineral deposits.
2.5
.
Capital(from lat. capitalis - main) was understood by Smith and Ricardo as a means of production. Other economists argued that capital is “a sum of money” and “securities.” There is a view that capital is a person's knowledge, skills and energy used in the production of goods and services. Today, in a broad sense, capital is understood as everything that brings income to its owner. These can be means of production, leased land, cash deposits in a bank, and labor used in production.
Capital can be 1)real(or physical) and 2) monetary, or financial(money used to purchase physical capital).
!!!
Factors of production include not all capital, but only real capital - buildings, structures, machines, machinery and equipment, tools, etc. - that is, everything that is used to produce and transport goods and services.Financial capital (stocks, bonds, bank deposits and money) is not considered a factor of production., since it is not associated with real production, but acts as a tool for obtaining real capital.
Investments(from lat. investre – to clothe) – 1) long-term investments of material and monetary resources in production.
The continuously occurring circular movement of capital forms its turnover. At the production stage, different parts of productive capital turn over in different ways (over different periods). Therefore, capital is divided into fixed and working capital.
Main capital
(machines, equipment, buildings): 1) used for a number of years, 2) transfers its cost to the product in parts, 3) costs are returned gradually.
Working capital
(raw materials, materials, semi-finished products, wages of workers): 1) consumed in one production cycle, included in the entire newly created product, 3) costs are reimbursed after the sale of the product.
2.6
. Entrepreneurial skills are essential production resource. They are possessed by a very small part of people who perform a whole range of functions, without which an organization and a successful production activity impossible.
Entrepreneurial functions
: 1) the ability to correctly combine factors of production - labor, land, capital - and organize production; 2) the ability to make decisions and take responsibility; 3) ability to take risks; 4) be receptive to innovations.
2.7
.
Factor income
: 1) labor?> wage; 2) earth?> rent(income of someone who owns land); 3) capital?> percent(payment for using other people's money); 4) entrepreneurial skills?> profit.
Rent(from lat. reddita - returned) - income regularly received by the owner from the use of land, property, capital, which does not require the recipient of the income to realize entrepreneurial activity, the cost of additional effort.
Loan capital– temporarily available funds provided as a loan on the terms of repayment and payment.
Percent(from Latin pro centrum – for a hundred) – 1)credit interest
(loan interest -mouth.) – the fee that the borrower must pay for using a loan, money or material assets; 2)deposit interest
– payment to a bank depositor for providing the bank with money on a deposit for a certain period.
2.8
.
Karl Marx on the factors of production
.
German economist and philosopher of the 19th century. Karl Marx identified personal and material factors of production, while the person himself, as the bearer of labor power, acts as a personal factor, and the material factor of production refers to the means of production, which in turn consist of means of labor and objects of labor.
Productive forces
(=
factors of production
) = 1) personal factor (person) + 2) material factor, means of production (means of labor + object of labor).
Means of laboris “... a thing or a complex of things that a person places between himself and the object of labor and which serves for him as a conductor of his influences on this object.” Means of labor, and above all instruments of labor, include machines, machine tools, tools with which man influences nature, as well as industrial buildings, land, canals, roads, etc. Application and creation of means of labor – characteristic labor activity person. In a broader sense, the means of labor include all the material conditions of labor, without which it cannot be carried out. The general labor condition is the land, the working conditions are also industrial buildings, roads, etc. The results of social knowledge of nature are embodied in the means of labor and the processes of their production use, in engineering and technology. The level of development of technology (and technology) serves as the main indicator of the degree to which society has mastered the forces of nature.
Subject of labor- a substance of nature that a person influences during the labor process in order to adapt it for personal or industrial consumption. An object of labor that has already undergone the influence of human labor, but intended for further processing, is called raw material. Some finished products may also enter the production process as an object of labor (for example, grapes in the wine industry, animal butter in the confectionery industry). “If we consider the entire process from the point of view of its result - the product, then both the means of labor and the object of labor both act as means of production, and the labor itself - as productive labor.”
The totality of production factors act as productive forces that are inextricably linked with production relations. Some characterize the material content of the process social production, and others have its historically determined form. Evolving, each stage of development of productive forces, characterized by a type industrial relations, constitutes a unique production method.
Mode of production
= productive forces + relations of production.
