In the short run, when one factor of production remains unchanged. The operation of the law assumes an unchanged state of technology and production technology. If in manufacturing process If the latest inventions and other technical improvements are applied, then an increase in output can be achieved using the same factors of production, i.e., technological progress can change the boundaries of the law.
If capital is a fixed factor and labor is a variable factor, then the firm can increase production by using more labor resources. But according to the law of diminishing marginal productivity, a consistent increase in a variable resource, while the others remain unchanged, leads to diminishing returns of this factor, i.e., to a decrease in the marginal product or marginal productivity of labor. If the hiring of workers continues, then in the end, they will interfere with each other (marginal productivity will become negative), and output will decrease.
The marginal productivity of labor (the marginal product of labor - $MP_L$) is the increase in the volume of production from each subsequent unit of labor:
$MP_L=\frac (\triangle Q_L)(\triangle L)$,
those. productivity gain to total product ($TP_L$) is equal to
$MP_L=\frac (\triangle TP_L)(\triangle L)$
The marginal product of capital $MP_K$ is defined similarly.
Based on the law of diminishing productivity, let's analyze the relationship between the total ($TP_L$), average ($AP_L$) and marginal products ($MP_L$), (Fig. 1).
There are three stages in the movement of the total product curve ($TP$). At stage 1, it rises at an accelerating pace, since the marginal product ($MP$) increases (each new worker brings more production than the previous one) and reaches a maximum at point $A$, i.e., the growth rate of the function is maximum. After point $A$ (stage 2), due to the law of diminishing returns, the $MP$ curve falls, i.e. each hired worker gives a smaller increment of the total product compared to the previous one, so the growth rate of $TP$ after $TC$ slows down . But as long as $MP$ is positive, $TP$ will still increase and reach its maximum at $MP=0$.
Figure 1. Dynamics and relationship of total, average and marginal products
At stage 3, when the number of workers becomes excessive in relation to fixed capital (machines), $MP$ becomes negative, so $TP$ starts to decrease.
The configuration of the average product curve $AP$ is also determined by the dynamics of the curve $MP$. At stage 1, both curves rise until the increment in output from newly hired workers is greater than average performance($AP_L$) previously hired workers. But after the point $A$ ($max MP$), when the fourth worker adds less to the total product ($TP$) than the third, $MP$ decreases, so the average output of four workers also decreases.
scale effect
Manifested in the change in long-term average production costs ($LATC$).
The $LATC$ curve is the envelope of the firm's minimum short-term average cost per unit of output (Fig. 2).
The long-term period in the company's activity is characterized by a change in the number of all production factors used.
Figure 2. Curve of long-term and average costs of the firm
The reaction of $LATC$ to a change in the parameters (scale) of a firm can be different (Fig. 3).
Figure 3. Dynamics of long-term average costs
Figure 4
Suppose that $F_1$ is a variable factor, while the other factors are constant:
total product($Q$) is the amount of an economic good produced using some amount of a variable factor. Dividing the total product by the amount of the variable factor consumed, we obtain the average product ($AP$).
Marginal product ($MP$) is defined as the increase in total product resulting from infinitesimal increments in the amount of variable factor used:
$MP=\frac (\triangle Q)(\triangle F_1)$
Factor substitution rule: the ratio of the gains of the two factors is in inverse relationship on the value of their marginal products.
Law of diminishing marginal productivity argues that with the growth in the use of any production factor(if the others remain unchanged), sooner or later a point is reached at which the additional application of a variable factor leads to a decrease in the relative and further absolute volumes of output.
Remark 1
The law of diminishing productivity has never been proven strictly theoretically, it is derived experimentally.
Factors of production are used in production only when their productivity is a positive value. If we denote the marginal product in monetary terms as $MRP$, and the marginal cost as $MRC$, then the resource use rule can be expressed by equality.
1. The essence of the law. With an increase in the use of factors, the total volume of production increases. However, if a number of factors are fully involved and only one variable factor increases against their background, then sooner or later there comes a moment when, despite the increase in the variable factor, the total volume of production not only does not grow, but even decreases.
The law says: an increase in the variable factor with fixed values of the rest and the invariance of technology ultimately leads to a decrease in its productivity.
2. Operation of the law. The law of diminishing marginal productivity, like other laws, operates in the form of a general trend and manifests itself only when the technology used is unchanged and in a short period of time.
In order to illustrate the operation of the law of diminishing marginal productivity, one should introduce the concepts:
- common product- the production of a product using a number of factors, one of which is variable, and the rest are constant;
- average product- the result of dividing the total product by the value of the variable factor;
- marginal product- increment of the total product due to the increment of the variable factor.
If the variable factor is incremented continuously by infinitesimal values, then its productivity will be expressed in the dynamics of the marginal product, and we will be able to track it on the graph (Fig. 15.1).
Rice. 15.1.Operation of the law of diminishing marginal productivity
Let's build a graph where the main line OAHSV– dynamics of the total product:
1. Divide the curve of the total product into several sections - cuts: OB, BC, CD.
2. On the segment OB, we arbitrarily take point A, at which the total product (OM) equal to variable factor (OR).
3. Connect the dots O and BUT- we will get the RAR, the angle of which from the point of coordinates of the graph will be denoted?. Attitude AR to OR– the average product, also known as tg ?.
4. Draw a tangent to point A. It will intersect the axis of the variable factor at point N. A APN will be formed, where NP- marginal product, also known as tg ?.
On the whole segment OV tg? the law of diminishing marginal productivity does not show its effect.
On the segment sun the growth of the marginal product is reduced against the background of the continuing growth of the average product. At the point FROM marginal and average product are equal to each other and both are equal?. Thus began to appear law of diminishing marginal productivity.
On the segment CD the average and marginal products are declining, and the marginal product is faster than the average. At the same time, the total product continues to grow. Here the operation of the law is fully manifested.
Behind the dot D, despite the growth of the variable factor, an absolute reduction even of the total product begins. It is difficult to find an entrepreneur who would not feel the effect of the law beyond this point.
In the short run, when one factor of production remains unchanged. The operation of the law assumes an unchanged state of technology and production technology. If the latest inventions and other technical improvements are applied in the production process, then an increase in the volume of output can be achieved using the same production factors, i.e., technological progress can change the boundaries of the law.
If capital is a fixed factor and labor is a variable factor, then the firm can increase production by employing more labor. But according to the law of diminishing marginal productivity, a consistent increase in a variable resource, while the others remain unchanged, leads to diminishing returns of this factor, i.e., to a decrease in the marginal product or marginal productivity of labor. If the hiring of workers continues, then in the end, they will interfere with each other (marginal productivity will become negative), and output will decrease.
The marginal productivity of labor (the marginal product of labor - $MP_L$) is the increase in the volume of production from each subsequent unit of labor:
$MP_L=\frac (\triangle Q_L)(\triangle L)$,
those. productivity gain to total product ($TP_L$) is equal to
$MP_L=\frac (\triangle TP_L)(\triangle L)$
The marginal product of capital $MP_K$ is defined similarly.
Based on the law of diminishing productivity, let's analyze the relationship between the total ($TP_L$), average ($AP_L$) and marginal products ($MP_L$), (Fig. 1).
There are three stages in the movement of the total product curve ($TP$). At stage 1, it rises at an accelerating pace, since the marginal product ($MP$) increases (each new worker brings more production than the previous one) and reaches a maximum at point $A$, i.e., the growth rate of the function is maximum. After point $A$ (stage 2), due to the law of diminishing returns, the $MP$ curve falls, i.e. each hired worker gives a smaller increment of the total product compared to the previous one, so the growth rate of $TP$ after $TC$ slows down . But as long as $MP$ is positive, $TP$ will still increase and reach its maximum at $MP=0$.
Figure 1. Dynamics and relationship of total, average and marginal products
At stage 3, when the number of workers becomes excessive in relation to fixed capital (machines), $MP$ becomes negative, so $TP$ starts to decrease.
The configuration of the average product curve $AP$ is also determined by the dynamics of the curve $MP$. At stage 1, both curves grow until the increment in output from newly hired workers is greater than the average productivity ($AP_L$) of previously hired workers. But after the point $A$ ($max MP$), when the fourth worker adds less to the total product ($TP$) than the third, $MP$ decreases, so the average output of four workers also decreases.
scale effect
Manifested in the change in long-term average production costs ($LATC$).
The $LATC$ curve is the envelope of the firm's minimum short-term average cost per unit of output (Fig. 2).
The long-term period in the company's activity is characterized by a change in the number of all production factors used.
Figure 2. Curve of long-term and average costs of the firm
The reaction of $LATC$ to a change in the parameters (scale) of a firm can be different (Fig. 3).
Figure 3. Dynamics of long-term average costs
Figure 4
Suppose that $F_1$ is a variable factor, while the other factors are constant:
total product($Q$) is the amount of an economic good produced using some amount of a variable factor. Dividing the total product by the amount of the variable factor consumed, we obtain the average product ($AP$).
Marginal product ($MP$) is defined as the increase in total product resulting from infinitesimal increments in the amount of variable factor used:
$MP=\frac (\triangle Q)(\triangle F_1)$
Factor substitution rule: the ratio of increments of two factors is inversely related to the value of their marginal products.
Law of diminishing marginal productivity argues that with an increase in the use of any production factor (while the others remain unchanged), sooner or later a point is reached at which the additional use of a variable factor leads to a decrease in the relative and then absolute volumes of output.
Remark 1
The law of diminishing productivity has never been proven strictly theoretically, it is derived experimentally.
Factors of production are used in production only when their productivity is a positive value. If we denote the marginal product in monetary terms as $MRP$, and the marginal cost as $MRC$, then the resource use rule can be expressed by equality.
In the short run, when one factor of production remains unchanged. The operation of the law assumes an unchanged state of technology and production technology. If the latest inventions and other technical improvements are applied in the production process, then an increase in the volume of output can be achieved using the same production factors, i.e., technological progress can change the boundaries of the law.
If capital is a fixed factor and labor is a variable factor, then the firm can increase production by employing more labor. But according to the law of diminishing marginal productivity, a consistent increase in a variable resource, while the others remain unchanged, leads to diminishing returns of this factor, i.e., to a decrease in the marginal product or marginal productivity of labor. If the hiring of workers continues, then in the end, they will interfere with each other (marginal productivity will become negative), and output will decrease.
The marginal productivity of labor (the marginal product of labor - $MP_L$) is the increase in the volume of production from each subsequent unit of labor:
$MP_L=\frac (\triangle Q_L)(\triangle L)$,
those. productivity gain to total product ($TP_L$) is equal to
$MP_L=\frac (\triangle TP_L)(\triangle L)$
The marginal product of capital $MP_K$ is defined similarly.
Based on the law of diminishing productivity, let's analyze the relationship between the total ($TP_L$), average ($AP_L$) and marginal products ($MP_L$), (Fig. 1).
There are three stages in the movement of the total product curve ($TP$). At stage 1, it rises at an accelerating pace, since the marginal product ($MP$) increases (each new worker brings more production than the previous one) and reaches a maximum at point $A$, i.e., the growth rate of the function is maximum. After point $A$ (stage 2), due to the law of diminishing returns, the $MP$ curve falls, i.e. each hired worker gives a smaller increment of the total product compared to the previous one, so the growth rate of $TP$ after $TC$ slows down . But as long as $MP$ is positive, $TP$ will still increase and reach its maximum at $MP=0$.
Figure 1. Dynamics and relationship of total, average and marginal products
At stage 3, when the number of workers becomes excessive in relation to fixed capital (machines), $MP$ becomes negative, so $TP$ starts to decrease.
The configuration of the average product curve $AP$ is also determined by the dynamics of the curve $MP$. At stage 1, both curves grow until the increment in output from newly hired workers is greater than the average productivity ($AP_L$) of previously hired workers. But after the point $A$ ($max MP$), when the fourth worker adds less to the total product ($TP$) than the third, $MP$ decreases, so the average output of four workers also decreases.
scale effect
Manifested in the change in long-term average production costs ($LATC$).
The $LATC$ curve is the envelope of the firm's minimum short-term average cost per unit of output (Fig. 2).
The long-term period in the company's activity is characterized by a change in the number of all production factors used.
Figure 2. Curve of long-term and average costs of the firm
The reaction of $LATC$ to a change in the parameters (scale) of a firm can be different (Fig. 3).
Figure 3. Dynamics of long-term average costs
Figure 4
Suppose that $F_1$ is a variable factor, while the other factors are constant:
total product($Q$) is the amount of an economic good produced using some amount of a variable factor. Dividing the total product by the amount of the variable factor consumed, we obtain the average product ($AP$).
Marginal product ($MP$) is defined as the increase in total product resulting from infinitesimal increments in the amount of variable factor used:
$MP=\frac (\triangle Q)(\triangle F_1)$
Factor substitution rule: the ratio of increments of two factors is inversely related to the value of their marginal products.
Law of diminishing marginal productivity argues that with an increase in the use of any production factor (while the others remain unchanged), sooner or later a point is reached at which the additional use of a variable factor leads to a decrease in the relative and then absolute volumes of output.
Remark 1
The law of diminishing productivity has never been proven strictly theoretically, it is derived experimentally.
Factors of production are used in production only when their productivity is a positive value. If we denote the marginal product in monetary terms as $MRP$, and the marginal cost as $MRC$, then the resource use rule can be expressed by equality.
Suppose that F 1 is a variable factor, while the other factors are constant:
Total product (Q) is the amount of an economic good produced using some amount of a variable factor. Dividing the total product by the amount of the variable factor consumed, we obtain average product (AR).
Marginal Product (MP) is defined as the increase in total product resulting from infinitesimal increments in the amount of variable factor used:
Factor substitution rule: the ratio of the increments of the two factors is inversely related to the magnitude of their marginal products.
Law of diminishing marginal productivity argues that with an increase in the use of any production factor (while the others remain unchanged), sooner or later a point is reached at which the additional use of a variable factor leads to a decrease in the relative and further absolute volumes of output.
The law of diminishing productivity has never been proven strictly theoretically, it is derived experimentally.
Factors of production are used in production only when their productivity is a positive value. If we denote the marginal product in terms of money through MRP, and the marginal cost - through MRC, then the rule for the use of resources can be expressed by the equality:
13) The concept of production costs. Economic and accounting costs.
Production costs are the costs of a firm in terms of money.
with the acquisition of factors of production and their use.
Accounting and economic costs of the firm. There are two approaches to
determination of costs, which are based on a different attitude to turnover
capital.
The turnover of capital can be assessed in the past tense, as a completed process. In this case, there is an accounting approach to determining costs. But turnover
capital can also be considered from the point of view of the future of the company, it is -
economic approach. Therefore, the accounting approach means the calculation is already
existing costs, summarizing the activities of the company, determining the real
costs. The economic approach is the formation of costs, identifying ways to
optimization. Both approaches are equally necessary for any firm, but each of them
fulfills its special function.
Functional difference between accounting and economic approaches to the definition
costs manifests itself in determining the types, composition and magnitude of costs.
Accounting costs include the following expense items related to
production: depreciation, material costs, labor costs,
deductions for social insurance.
Economic costs differ from accounting costs primarily in that
express different use cases
company funds.
The company always has a choice in the use of funds: you can invest
money into production and make a profit; you can put them in a bank
interest. At the same time, the same capital expenditures will give different results.
Yes, in the system economic calculations there are opportunity costs.
Opportunity costs, or choice costs, are the monetary costs associated with
with missed opportunities for the best use of the firm's resources (costs
missed opportunities). Opportunity costs are expressed in the price of the best
available opportunity. The optimal cost option plays the role of a
the benchmark for the business of the firm. With him she compares her own
accounting costs.
While the opportunity cost is monetary expenses firms, they do not always coincide with the latter. For example, a firm can buy resources from the government for
fixed price. The price of these resources is an accounting cost. However, on
market these same resources have free, higher prices. Resource costs per
free prices and constitute an opportunity cost for the firm. Another example,
when a firm can purchase a portion of resources at free market prices ("explicit"
cash costs), and the other part of the resources involved in production,
is the property of the firm ("implicit" costs). opportunity cost in
In this case, they are equal to the sum of "explicit" (cash) and "implicit" costs.
Thus, calculating your costs to determine the volume of production and,
therefore, proposals, the firm will focus on alternative
costs, considering them (rather than accounting costs) as
factor that limits the supply of goods on the market. Every firm strives to
minimization opportunity cost, since any increase in them reduces
income that stimulates entrepreneurial activity.
Economic costs differ from accounting costs not only in their
alternative, but also a method of calculation. The economic cost of production
includes the so-called normal profit, which is the minimum
additional income on the value advanced, the receipt of which is
an indispensable condition for the operation of the enterprise. Accounting costs do not include
this important cost component, since they express not the intended
commercial performance of production, but real, actually existing.
Finally, economic costs differ from accounting costs in their structure.
Economic costs are divided into fixed and variable, average and marginal.
This division of economic costs allows us to trace the process of their
formation, and consequently, to optimize it.
14) Types of production costs in the short run. Fixed, variable costs. General, average, marginal costs.
Production costs in the short run are divided into fixed, variable, general, average and marginal.
Fixed costs (fixedcost, FC) are costs that do not depend on the volume of production. They will always take place, even if the firm does not produce anything. These include: rent, depreciation deductions for buildings and equipment, insurance premiums, expenses for capital repairs, payment of obligations under bonded loans, as well as salaries for top management personnel, etc. Fixed costs remain unchanged at all levels of production, including zero. Graphically, they can be represented as a straight parallel abscissa axis (see Fig. 15.1). It is denoted by the line FC.
Variable (variablecost, VC) costs that depend on the volume of production. These include the cost of wages, raw materials, fuel, electricity, transport services and similar resources. Unlike fixed costs, variable costs vary in direct proportion to the volume of production. Graphically, they are depicted as an ascending curve (see Fig. 15.1), denoted by the line VC.
The variable cost curve shows that as output increases, the variable costs of production increase.
The distinction between fixed and variable costs is essential for every businessman. An entrepreneur can control variable costs, as their value changes over time. short term as a result of changes in the volume of production. Fixed costs are beyond the control of the company's administration, since they are mandatory and must be paid regardless of the volume of production.
Rice. 15.1. Schedule of fixed, variable and gross costs
General, or gross, costs (totalcost, TC)? overall costs for a given volume of production. They are equal to the sum of fixed and variable costs: TC? FC? VC.
If we superimpose the curves of fixed and variable costs on top of each other, we get a new curve that reflects the total costs (see Fig. 15.1). It is denoted by the TS line.
Average total (averagetotalcost, ATC, sometimes called AC) ? these are costs per unit of output, i.e., total costs (TC) divided by the number of products produced (Q): ATC? TS/Q.
Average total costs are usually used to compare with the price, which is always quoted per unit. Such a comparison makes it possible to determine the amount of profit, which allows you to determine the tactics and strategy of the company in the near future and in the future.
Graphically, the curve of average total (gross) costs is depicted by the ATC curve (see Fig. 15.2).
The average cost curve is U-shaped. This suggests that average costs may or may not be equal to the market price. A firm is profitable or profitable if the market price is above average cost.
Rice. 15.2. Average cost curves
AT economic analysis In addition to average total costs, concepts such as average fixed and average variable costs are used. This is similar to the average total cost, fixed and variable costs per unit of output. They are calculated as follows: fixed costs(AFC) are equal to the ratio of fixed costs (FC) to output (Q): AFC ? FC/Q. Average variables (AVC), by analogy, are equal to the ratio of variable costs (VC) to output (CO):
AVC? VC/Q.
Average total cost? the sum of average fixed and variable costs, i.e.:
ATS? AFC + AVC, or ATC? (FC?VC) / Q.
The value of average fixed costs continuously decreases as the volume of production increases, since the fixed amount of costs is distributed over more and more units of production. Average variable costs change in accordance with the law of diminishing returns.
Important for determining the strategy of the company in economic analysis is given marginal cost.
Marginal, or marginal, costs (marginalcost, MC) are the costs associated with the production of an additional unit of output.
MC can be determined for each additional unit of output by dividing the change in the increase in the sum of total costs by the amount of increase in output, i.e.:
MS? ?TS/?Q.
Marginal cost (MC) is equal to the increase in variable costs (VC) (raw materials, labor), if it is assumed that fixed costs (FC) are unchanged. Therefore, marginal cost is a function of variable cost. In this case:
MS? ?VC/?Q.
Thus, marginal cost (sometimes referred to as incremental cost) is the increase in cost resulting from the production of one additional unit of output.
Marginal cost measures how much it will cost a firm to increase its output by one unit. Graphically, the marginal cost curve is an ascending line MC, intersecting at point B with the curve of average total costs ATC and at point C with the curve of average variable costs AVC (see Fig.
rice. 15.3). Comparison of average variables and marginal production costs? important information to manage the firm, determine the optimal size of production, within which the firm consistently receives income.
Rice. 15.3. Marginal Cost Curve (MC)
From fig. 15.3 shows that the marginal cost curve (MC) depends on the size of the average variable costs (AVC) and gross average costs (ATS). At the same time, it does not depend on average fixed costs (AFC), because fixed costs FC exist regardless of whether additional products or not.
Variable and gross costs rise with output. The rate at which these costs increase depends on the nature of the production process and, in particular, on the extent to which production is subject to the law of diminishing returns with respect to variable factors. If labor is the only variable, what happens when output increases? To produce more, the firm must hire more workers. Then, if the marginal product of labor decreases rapidly as labor costs increase (due to the law of diminishing returns), more and more costs are needed to accelerate output. As a result, variable and gross costs rise rapidly along with an increase in output. On the other hand, if the marginal product of labor falls slightly as more labor is used, costs will rise less rapidly as output increases. Marginal and average costs are important concepts. As we shall see in the next chapter, they have a decisive influence on the firm's choice of output. Knowledge short term costs especially important for firms operating in conditions of marked fluctuations in demand. If a firm is currently producing at a rate at which marginal cost rises sharply, uncertainty about future increases in demand may force the firm to make changes to its production process and likely induce additional costs today to avoid higher costs tomorrow.
15) Long-term costs. The problem of the optimal size of the enterprise.
AT long term the firm has great opportunities change the volume of production, because it can change any cost. Deciding on the size of the output in the future time, the firm, in essence, chooses the size of the enterprise. The long-run average cost curve LAC (from the English “longaveragecosts”) helps justify this choice.
The curve is built on the basis of short-term cost curves - SAC (from the English "shortaveragecosts") for various production volumes (Fig. 7.8.1). The vertical axis shows average costs, and the horizontal axis shows output. Curve SAC1 shows the dynamics of average costs for the smallest of the four enterprises, curve SAC4 - for the largest. The optimal size in this industry will be the size of the third enterprise Q3.
Curve LAC (long-term average costs) has the form of a smooth line drawn tangentially to the curves of short-term average costs. It is called the firm size selection curve. Its shape depends on the scale of production.
The scale of production is determined by the size of the resources used for a given production technology. Of two firms using the same technology, the scale of production is larger for the one that uses more resources. If a firm with the same technology (i.e., provided that the ratio between resources does not change) doubles the amount of all resources used, this means that its scale of production has doubled.
A change in the scale of production causes a change in the volume of production. The response of the volume of production to a change in the scale of production is called economies of scale. The economies of scale of production can be positive, negative and permanent.
Positive economies of scale occur when output grows faster than the scale of production changes. On the graph, positive returns to scale reflect the segment of the curve where the LAC curve decreases as output increases. The positive scale effect of production is due to the fact that large enterprises have a number of advantages that contribute to lower costs. They have great potential for specializing the labor of workers and management personnel can use capital more efficiently. If the positive economies of scale in production are long-term (the LAC curve has a gently decreasing slope), then in a given industry than larger enterprise, the greater the ability to reduce costs per unit of output. This is the case in heavy industries.
Constant economies of scale means a proportional change in the volume of output to the volume of resources. This situation can take place in an industry that produces consumer goods.
With negative economies of scale, output grows at a slower rate than the amount of resources used. Enterprises with negative economies of scale are typical for the sphere consumer services.
Economies of scale are important when choosing the optimal size of an enterprise. Within the limits of the positive economies of scale, the firm can profitably increase the volume of production. The negative effect indicates the excessive size of the firm. Within constant economies of scale, a firm can be equally efficient at different scales of production.
types of company income.
AT market economy, represented by the movement of commodity-money flows, income always acts as a certain amount of money. Income is a monetary value of the performance of a firm (or an individual individual) in the form of a sum of money coming into its direct disposal, i.e. This is the revenue from sold products (services) during a certain period, usually for a year. It reflects the economic performance economic activity firms. This means that the condition for receiving cash income is effective participation firms in the economic life of society. The very fact of receiving income is an objective evidence of such participation, and its size is an indicator of the scale of this participation.
The income of the company consists of two parts:
from the proceeds from the sale of products(goods or services). It is a certain amount Money from the main and non-core activities of the company, the end result of which is manufactured and sold products or services rendered (work performed), paid for by the buyer or customer;
from non-operating income, which are a side income of the firm. They are not directly related to the main production activities. Their sources are: dividends on invested shares or acquired shares and other securities; fines received from counterparties; penalties, forfeits, interest for keeping money in a bank and other income.
The desire to maximize one's income dictates the economic logic of behavior for any market entity. It acts as ultimate goal and a powerful incentive for everyday entrepreneurship. The firm's income indicates the sale of products, the expediency of the costs incurred, the public recognition of the consumer properties of the product.
According to the types of costs, revenues are also divided. Therefore, it is customary to allocate total, average and marginal income.
Total (cumulative) income ( TR) – is the total amount of money received from the sale of a certain quantity of goods. It is determined by multiplying the price of a product by the number of units sold:
TR = R× Q,
where TR – totalrevenue(revenue) – total income; R- the price of a unit of goods; Q- the number of units sold.
Average income (AR) is the proceeds from the sale of a unit of production, i.e. gross income per unit of product sold. It acts as the price per unit for the buyer and as income per unit for the seller.
The average income is equal to the quotient of dividing the total income by the number of products sold and is calculated by the formula
AR = TR : Q,
where AR- average income; TR- total income Q- the number of units sold.
At a constant price, the average income AR is equal to the selling price, which is obvious from the above formula:
,
where R- the price of a unit of production.
Therefore, price and average income in Western economic theory act as one and the same phenomenon, which is only considered from different points of view. Average income calculation ( AR) it makes sense to produce for a certain period only if the prices for manufactured homogeneous products change (or if the firm focuses on the production of a number of products, models, etc.).
Marginal (additional) income ( MR) – this is additional income to the total income of the firm, received from the production and sale of one additional units of goods. It makes it possible to judge the efficiency of production, as it shows the change in income as a result of an increase in output and sales of products per additional unit of output.
marginal revenue ( MR) allows you to assess the possibility of payback for each additional unit of output. In combination with the indicator of marginal cost, it serves as a cost guide for the possibility and expediency of expanding the volume of production of a given firm.
Marginal revenue is defined as the difference between the total sales revenue n+ 1 item and total sales revenue P goods:
MR = ∆TR/∆Q,
or calculated as,
where D TR– increment of total income, D Q- an increase in output by one unit.
Under perfect competition, the firm sells additional units of output at a constant price, since any seller cannot influence the established market price. Marginal revenue will be equal to the price of a unit of output ( MR= P), because D TR= P D Q, that's why
MR = PΔQ / ΔQ = P.
total income ( TR) increases by a constant amount, equal to the price units of output, since, under perfect competition, additional units are sold at a constant market price.
Since the firm can sell additional units of output at a constant price, its curve marginal income (MR) under conditions of pure competition coincides with perfectly elastic demand curve (D). The firm's total income curve ( TR) has the form of a straight ascending line, since this indicator increases by a constant amount with each additional unit of sales.
Note that gross income grows as long as marginal income is positive. But when marginal revenue is negative, TR decreases. Marginal revenue is positive if the demand for the product is elastic. .
17) Monopolistic competition. The behavior of the firm in the short and long run.
Monopolistic competition- a type of market structure, consisting of many small firms producing differentiated products, and characterized by free entry into the market and exit from the market.
The concept of "monopolistic competition" goes back to the book of the same name by the American economist Edward Chamberlin (1899-1967), published in 1933.
Monopolistic competition, on the one hand, is similar to the position of a monopoly, because individual monopolies have the ability to control the price of their goods, and on the other hand, it is similar to perfect competition, since it is assumed that there are many small firms, as well as free entry into the market and exit from the market, i.e., the possibility of the emergence of new firms.
A market with monopolistic competition is characterized by the following features:
a) the presence of many sellers and buyers (the market consists of a large number of independent firms and buyers);
b) free entry and exit from the market (the absence of barriers to prevent new firms from entering the market, or obstacles to existing firms leaving the market);
c) heterogeneous, differentiated products offered by competing firms. Moreover, the products may differ from one another in one or a number of properties (for example, in chemical composition);
d) perfect awareness of sellers and buyers about market conditions;
e) influence on the price level, but within a rather narrow framework.
Demand for products reflects the demand curve, showing the total volume of products supplied by the firm at each price. The demand curve for products, like that of a monopoly firm, is decreasing, with the only difference being that it is more elastic, since the seller in conditions of monopolistic competition meets with a relatively large number of competitors producing substitute goods. The more competitors and the weaker product differentiation, the more elastic the demand curve. Under monopolistic competition, the marginal revenue curve (MR)
located below the producer's demand curve (D)
, and its slope will be half the slope of the demand line.
In the short run, under conditions of monopolistic competition, a profit maximizing firm will tend to produce at this price combination (OR) and output (OQ) , which equalizes the marginal cost (MS) and marginal revenue (MR ). In this case, the firm can make super profits.
In the long run, profit maximization involves output at which marginal revenue equals long-run marginal cost. In the long run, excess profits stimulate new firms to enter the market, which causes a decrease in the demand curve for established firms, i.e. shifts the demand curve to the left. This means a decrease in the volume of sales at each price level. Entry of new firms will continue until the additional profits disappear.
The firm is still maximizing profit at this price combination. (ORE)
and output volume (O.Q.E.)
when marginal cost equals marginal revenue. In this case, however, the firm earns only a normal profit. The equilibrium at the level of normal profit in the long run is similar to the equilibrium of a firm under perfect competition, with the difference that monopolistic competition causes less efficient market efficiency. Under monopolistic competition, the firm produces less product and sells it at a higher price compared to perfect competition. Since the demand curve has a negative slope, it touches the long-run average cost curve to the left of the latter's minimum point. Consequently, the size of each firm is less than optimal, resulting in excess capacity in the market.
What are the economic consequences of monopolistic competition? First, resources are underused for the production of goods, i.e., excess production capacity arises. Secondly, consumers do not receive goods at the lowest price, i.e., the products necessary for the consumer are underproduced. Third, tailoring a product to consumer demand requires product differentiation and improvement. Fourth, the adaptation of consumer demand to the product causes the improvement of advertising. These two types of adaptation to a certain extent compensate monopolistic competition, however, the maximum economic and social efficiency is not achieved.
It can be seen from the figure that the minimum LATC , dot M , wherein LMC crosses LATC , located to the right of the point E, which corresponds to long run profit maximizing output qE . The efficiency of the resources used in production is achieved when the average costs in the long run are minimal. This efficiency will be achieved by issuing qM , corresponding to the minimum long-run average cost (point M ). But the profit-maximizing output of a monopolistically competitive firm will be only qE , which is much less qM . difference between qM and qE called excess power.
18) Oligopoly, its features and factors. Forms of oligopoly
A product from different sellers can be both standardized (for example, aluminum) and differentiated (for example, cars).
Oligopolistic markets are dominated, as a rule, by two to ten firms, which account for half or more of the total sales of the product.
The word "oligopoly" was introduced by the English humanist and statesman Thomas More (1478-1535) in the world-famous novel Utopia (1516).
Oligopolistic markets have the following signs:
a) a small number of firms and a large number of buyers. This means that the market supply is in the hands of a few large firms that sell the product to many small buyers;
b) differentiated or standardized products. In theory, it is more convenient to consider a homogeneous oligopoly, but if the industry produces differentiated products and there are many substitutes, then this set of substitutes can be analyzed as a homogeneous aggregated product;
c) the presence of significant barriers to entry into the market, i.e. high barriers to entry into the market;
d) firms in the industry are aware of their interdependence, so price controls are limited.
Only firms with large shares in total sales can influence the price of a product. The measure of market dominance by one or more large firms is determined by the concentration ratio (the percentage of sales of the four largest firms to the total industry output) and the Herfindahl index, which is calculated by summing the results obtained by squaring the percentage market shares of firms selling products in this market :
H = S12 + S22 + S32 + .. + SN2
where S1
- market share of the firm providing the largest volume of deliveries; S2
- market share of the next largest supplier, etc.
The behavior of firms in oligopolistic markets is likened to the behavior of armies in war. Firms are rivals, and the trophy is profit. Their weapons are price controls, advertising, and output.
^ Price war is a cycle of successive price reductions by competitors for oligopolistic market firms. She is one of many possible consequences oligopolistic competition.
Price wars are good for consumers, but bad for sellers' profits. Wars continue until the price drops to the level of average cost. In equilibrium, both sellers charge the same price P = AC = MS
. The total market output is the same as it would be under perfect competition. Equilibrium exists when no firm can any longer benefit from lower prices, that is, when price is equal to average cost and economic profits are equal to zero. Price drop below this level will result in losses. At the same time, each firm proceeds from the fact that if other firms do not change their price, then it also has no incentive to raise the price.
Unfortunately for buyers, price wars tend to be short-lived. Oligopolistic firms, after some time, enter into cooperation with each other in order to avoid wars in the long term and, consequently, undesirable effects on profits.
oligopoly models.
^ Collusion based oligopoly model. In an oligopolistic market, each firm has a choice between cooperative (cooperative) and non-cooperative (non-cooperative) behavior. In the first case, the firms are not bound in their behavior by any explicit or secret agreements with each other. It is this strategy that generates price wars. Firms come to cooperative behavior if they intend to reduce mutual competition. If, in an oligopoly, firms actively and closely cooperate with each other, this means that they collude. This concept is used when two or more firms have jointly fixed prices or outputs and divided the market or decided to do business together.
Collusion is a generic concept in relation to a cartel, a trust.
Cartel- a group of firms acting together and agreeing on decisions about output volumes and prices as if they were a single monopoly.
Price leadership model. In oligopolistic markets, one firm acts as a price leader that sets the price to maximize its profit while other firms follow the leader. Competing firms charge the same price as the leader.
The leading firm assumes that other firms in the oligopolistic market will not react in a way that will change the price it has set. The price leadership model is called partial monopoly because the leader sets the monopoly price, which is based on his marginal revenue and marginal cost. Other firms take this price as given, they follow the leader's prices, believing that more large firms have more information about market demand.
Price leadership has the character of covert collusion, since open price agreements are prohibited by antitrust laws. Price leadership has an advantage over a cartel because it preserves the freedom of firms in their production and marketing activities, whereas in cartels they are regulated by quotas and/or market delimitation.
Distinguish two main types of price leadership:
a) the leadership of the firm with significantly lower costs than the competitive environment;
b) the leadership of a firm that occupies a dominant position in the market, but does not differ significantly from followers in terms of costs.
Allocate a market model of a dominant firm with a competitive environment and closed entry and free entry.
^ Cournot duopoly model. The duopoly model was first proposed by the French mathematician, economist and philosopher Antoine-Augustin Cournot in 1838.
Duopoly- this is market structure where two sellers protected from additional sellers are the only producers of a standardized product that has no close substitutes. Duopoly economic models are useful for showing how an individual seller's guess about a competitor's response affects equilibrium output.
The Cournot duopoly model assumes that each of the two sellers assumes that its competitor will always keep its output unchanged at the current level. The Cournot model assumes that sellers do not learn about their mistakes.
There are various modifications of the duopoly model: the Chamberlin model, the Stackelberg model, the Bertrand model, and the Edgeworth model.
19) Monopoly, its forms. natural monopoly
There is a pure monopoly and a natural monopoly.
natural monopoly- an industry in which long-run average costs are minimal only if only one firm serves the entire market.
A natural monopoly may exist as a result of barriers to entry by competitors, government privileges, or limited information.
A natural monopoly has large increasing returns to scale, and production costs much lower than perfect competition or oligopoly.
A natural monopoly is based on features of technology that reflect the natural laws of nature, not on property rights or government licenses. The forced dispersal of production to a few firms is inefficient, since it would lead to an increase in production costs.
There are a number of industries public utilities, telecommunications, etc.), which are dominated by natural monopolies.
The existence of a natural monopoly is the main argument in favor of the nationalization of such industries as, for example, rail transport.
On the chart LAC
and LMC
- curves of average and marginal costs in the long run, D-
demand Curve, MR
is the corresponding marginal revenue curve. Optimal production and price Q1, P1
are determined by the intersection of curves LMC and MR
. The profit of the monopoly firm is equal to the area SR1AB
. However, the release Q1
"very small" and the price P1
"very high". Optimal for society would be the release O3
and price P3.
But the monopolist will not go for it. Hence, it is most expedient for the state body that regulates this monopoly firm to determine the price for its products. P3 = LMC (Q3).
This price level would not compensate for the cost of output, it would be below the average cost at the volume of output Q3, P3< LAC (Q3) = GO3 = ОН
. As a result, a monopoly firm, carrying out the optimal volume of production from the point of view of society Q3
, would have a loss equal to the area P3HGF
. In this case, the monopoly firm can leave the market. To prevent this, she will need a subsidy, which should at least be equal to the same amount P3HGF
which, in turn, can lead to a net loss to society.
There is another solution to the problem of natural monopoly: the state (or local authorities) assume the responsibility to provide this type of service. In this case, the state (local) company can receive subsidies from the state local budget. The practice of subsidizing is considered to be ineffective, since the taxation required for this distorts the system of competitive prices.
There are several options state regulation prices and tariffs of natural monopolies. Let's highlight two options.
The first. In Russia and the United States, special authorities have been established to regulate electricity tariffs. The level of tariffs is set according to the principle: "costs plus profits".
Second. Governments initiate competition for the market where competition within the market is either impossible or costly due to significant economies of scale. In this case, an auction is held and the right to serve the market is granted for a certain time to the enterprise that undertakes to contribute the largest amount to the budget revenue. The greater the number of competitors-firms for this right, the greater part of the profits can go to the budget.
Since natural monopolies have higher average costs than marginal costs, marginal cost pricing leads to unprofitability. This makes it necessary to abandon the principle of pricing at marginal costs, but on condition that the loss in efficiency caused by such a refusal is minimized.
In addition to those considered, there are other methods of regulating prices and tariffs for products (services) of natural monopolies.
20) Labor market. The economic nature of wages
Labor market- the sphere of formation of supply and demand for labor. Through it, the sale of labor for a specific period is carried out.
The peculiarity of the labor market and its mechanism: the object of sale on it is the right to use the labor force, knowledge, qualifications and abilities for the labor process.
In a broad sense, the labor market is a system of socio-economic and legal relations in society, norms and institutions designed to ensure a normal continuous process of reproduction of the labor force and the efficient use of labor.
Relations in the labor market are regulated by public and state institutions.
The labor market is an important part of any economic system, since its condition in to a large extent determines the rate of economic growth of this system. At the same time, the labor market is a key element of the socio-economic policy pursued by the authorities. Thus, the labor market is simultaneously influenced by the social and economic policies of the region or the state as a whole.
These relations are contradictory due to the laws of supply and demand. In the process of exchange, a state of their temporary equilibrium is established, which is expressed a certain level employment and wages.
The demand for labor force in conditions of free competition is formed under the influence of two main indicators: real wages and the cost of the marginal product of labor (the product of labor produced by the last hired worker). The supply of labor directly depends on the level of wages: the higher the salary, the higher the level of labor supply.
The labor market is often the most accurate detector social position the population of a given country. The emergence of the labor market is associated with the formation market relations and development of capitalism. It is free labor, when an employee can quit at any moment, and is not “tied” to the enterprise, like a peasant in the feudal era, that characterizes the process of the destruction of feudalism and the birth of capitalism.
Currently, the mobility of labor resources is one of the most important parameters under which economic growth is possible in the economy in general. Labor mobility is characterized by the real opportunities for workers and their families to move to other areas to choose a place of residence where they can have more profitable offer for hire. Thus, labor mobility contributes to higher efficiency and productivity in the economy.
Wages are a form of material remuneration for labor, a part of the cost of created and sold products or services received by employees of enterprises and institutions. Salary is a value category. Under all conditions, it must be based on the amount of means of subsistence objectively necessary for the reproduction of the labor force. Payroll costs are an element of production costs. The minimum wage is designed to provide normal conditions for the reproduction of an employee who performs the least hard work. The amount of such wages is usually determined by calculating the subsistence minimum, which is calculated according to the standards for meeting the needs of an employee in goods and services, taking into account the price level.
wage regulator in economic systems elements of active state regulation can be centrally developed and approved Tariff scale- a set of standards by which the level of wages of employees is regulated.
When deciding on the amount of wages, it is important not only how much money the employee will have, but also what he can buy with this money. In other words, the purchasing power of money is determined by the ratio of nominal and real wages.
Nominal wages- this is the amount of money received by the employee at the cash desk.
Real wage is the quantity of goods and services that can be purchased for a given nominal wage.
Based on various assessments, time-based, piecework and bonus forms of remuneration are distinguished.
When accruing Time payment The time spent on productive work is taken into account. Time wages in developed countries are mostly calculated on an hourly or weekly basis, while employees and management are paid on a monthly basis. Time wages are applicable to jobs that require attention, care and mental activity.
At piecework payment The basis of the calculation is the number of products produced. Also used here hourly payment, which is converted to the quantity of the product and is called the price for piece work. If it is set in money per unit of product, then this is a monetary rate. If it is calculated in terms of the time required to complete a unit of work, then it is called a piece-time rate. The rate of piece work must correspond to that obtained by determining the rate of time productivity. The piecework form is used to pay for the same type, limited, regularly recurring, measurable activity of an individual employee or group of persons.
Premium payment Enter if extension technical means and high-performance complex machines makes it impossible to use performance-based payment. But even with this form of payment, normal performance is taken as the basis. If it is higher, then the employee receives an additional bonus in addition to the basic salary.
21) Capital market. Capital and its structure. The economic nature of profit. Depreciation
capital market in general definition this is such a part of the financial market in which both demand and supply are formed, in most cases - for long-term or medium-term borrowed capital.
A special sphere of market relations in which the object of the transaction is the money capital provided for a loan, and both demand and supply for this are simultaneously formed here.
Borrowed capital is those funds that are loaned at a fixed percentage, and required condition at the same time - the return of capital.
Credit - one of the forms of movement of loan capital. It is based on the funds released by reproduction: this is a part of working capital in monetary terms, various depreciation funds of enterprises, profits that go to expand and upgrade production, and also savings and cash incomes of the population.
The functional point of view on the R.C.: this is such a system of market relations that ensures the redistribution and accumulation of capital in order to ensure a constant process of reproduction. The institutional point of view is a set of various stock exchanges and financial institutions through which borrowed capital is moved.
Thus, the capital market is an integral sector of the financial market, breaking up into the market for long-term medium-term loans and the market valuable papers. It is also the main source of long-term investment resources for corporations, governments and banks.
The capital market has evolved from the appearance of a market for the simplest commodity production, where the circulation was in the form of usurious capital - to a very wide development of a diversified market.
The most developed capital market in the world is in the USA. It is known for its large branching, the existence of a huge and strong credit system and an equally impressive securities market, as well as the highest level of savings.
The capital market is one of the main, main segments in financial market.
The main players in this market are:
ordinary primary investor, i.e. owner of any independent financial resources, mobilized by banks and transferred to loan capital;
professional intermediaries - a variety of credit and financial organizations that carry out the accumulation (i.e., direct attraction) of money capital, turning them into loan capital and, after that, also temporarily transfer it to borrowers on the basis of a return for a fee in the form of predetermined interest;
the borrower is an individual and a legal entity, or the state. The borrower lacks financial resources and is willing to pay a professional intermediary to temporarily use them.
Profit- a positive difference between income (proceeds from the sale of goods and services) and the costs of production or acquisition and sale of these goods and services. Profit = Revenue − Costs (in monetary terms). Is the most important indicator financial results economic activity of business entities (organizations and entrepreneurs).
The concept of "profit" is ambiguous and usually distinguished:
accounting profit- the difference between the amount of sales (sales income) taken into account and the allowable expenses (costs); it is also ambiguous depending on accounting standards (for example, IFRS, RAS);
economic profit- a more informal indicator is the remainder of the total income after deducting all costs, the difference between accounting profit and additional costs, such as: uncompensated own costs of the entrepreneur, not included in the cost, sometimes even “lost profits”, the cost of “stimulating” officials in corruption conditions, additional bonuses to employees, etc.
They also calculate gross (balance sheet, total) profit and net profit - the remaining after paying taxes and deductions from gross profit.
In the English-speaking tradition, the concept of "profit" can correspond to different terms - profit, gain, return.
The amount of profit characterizes the success of doing business, making a profit is usually the main goal and driving motive of all types of entrepreneurship.
Capital ... avoids noise and scolding and has a timid nature. This is true, but it is not the whole truth. Capital is afraid of no profit or too little profit, just as nature is afraid of the void. But once sufficient profits are available, capital becomes bold. Provide 10% and the capital is ready for any use, at 20% it becomes lively, at 50% it is positively ready to break its head, at 100% it violates all human laws, at 300% there is no such crime that it would not risk, even under pain of the gallows. If noise and scolding are profitable, capital will contribute to both. Proof: smuggling and the slave trade.
Depreciation (depreciation) is the process of transferring the value of fixed assets to the cost of manufactured and sold final products as they wear out, both material and moral.
With the aging of equipment, buildings and structures, machines and other fixed assets, monetary deductions are made from the cost of the final product in order to further update them. These cash flows are called depreciation charges. For this, special sinking funds, in which all transferred funds are accumulated after the sale of finished products.
The percentage required to compensate for the cost of a part of a capital good that has been depreciated during the year is calculated by the ratio of the amount of annual depreciation deductions to the value of the fixed asset and is called depreciation rate.
For example, on manufacturing plant for metalworking, there is a lathe, the cost of which is 250,000 rubles. The service life of the machine is 20 years. Based on these data, it can be calculated that the amount of depreciation will be:
250 000 rub. / 20 years = 12,500 rubles. in year.
Also, for this example, you can find the depreciation rate lathe, which will be equal to:
12 500 rub. / 250 000 rub. × 100% = 5%.
In fact, the depreciation rate is set by the state by law, thereby indirectly controlling the process of updating depreciated fixed assets of enterprises and, in some cases, helping to form depreciation funds in a short time by establishing an accelerated depreciation method. For example, setting the depreciation rate not 5, but 25%. All this is due to the fact that the state exempts depreciation deductions from taxation.
In accounting, there are four ways to calculate depreciation:
straight line depreciation method when deductions are made in equal installments throughout the life of the capital good;
diminishing balance method when deductions are made not in equal parts, but in parts calculated by the ratio of a certain depreciation rate to its residual value for each year of operation. For example, in the first year of operation, 5% of 250,000 rubles will be transferred, which will amount to 12,500 rubles as calculated above, then in the second year - (250,000 rubles - 12,500 rubles) = 237,500 rubles. from which 5% will be transferred.
write-off method over the cumulative useful life;
write-off method in proportion to the number of products sold(services, works).
22) Loan capital and its loan interest
Capital- all means of production created by people in order to increase the production of goods and services. Capital includes machines, buildings, structures, vehicles, tools, stocks of raw materials, semi-finished products, patents, know-how, etc.
Capital is created through savings, which increase consumption opportunities in future periods due to a relative reduction in current consumption. In this regard, individuals who save, compare current consumption with the future.
Distinguish two main forms of capital:
physical capital, which is a stock of production resources involved in the production of various goods; it includes machines, tools, buildings, structures, vehicles, stocks of raw materials and semi-finished products;
human capital- capital in the form of mental abilities acquired in the process of training or education or through practical experience.
The cost of capital per unit of time expresses the specific cost of capital. Total physical capital in this moment time represent funds that are replenished as a result of investments.
There are two main forms of productive capital:
main capital- these are means of labor, i.e., factors of production in the form of factories, equipment, machines, etc., participating in the production process for a long time;
working capital are the objects of labor (raw materials, finished products) and labor force.
Capital itself is presented in the form of funds.
Funds is the amount of capital at a given point in time. At any given time, a firm has a certain amount of equipment and other types of capital. The purpose of capital analysis is to understand how funds are created and changed, and for this it is necessary to study the costs associated with the creation of new capital and the benefits from this.
To create new capital, not only the company's own funds are required, but also borrowed funds, for the use of which certain percentage.
^ Loan interest is the price paid to the owners of capital for the use of their borrowed funds during certain period. The loan interest is expressed through the rate of this interest per year. Assume that the interest rate is 5% per year. This means that the owners of capital will be paid 5 kopecks for every ruble they have given others the opportunity to use during one year.
Trading using funds is carried out in various financial markets. In a perfectly competitive financial market, neither individual borrowers nor individual lenders influence the market rate of interest. They accept existing prices because the demand of each individual borrower is only a small fraction of the total supply of loan capital, and each lender offers only a small part of the total demand for loan capital. The interest rate is determined by the supply of accumulated funds and the demand for borrowed funds from all borrowers.
The loan interest rate influences investment decisions.
Investment- the process of replenishment or addition of capital funds; represents the inflow of new capital in a given year. In the process of production there is a "wearing out" of capital funds. Working capital (stocks of materials and semi-finished products) is used and reduced in the production process, while fixed capital (buildings, equipment, etc.) is aging physically or morally and must be replaced. The rate at which fixed capital is physically worn out is called physical depreciation.
By increasing investment, firms thereby create prerequisites for increasing profits. When investing, the firm decides whether the increase in profits resulting from the investment will be greater than the cost of production costs.
23) Market of natural resources. Land as a factor of production. Land rent. Land price.
Natural resources are components of nature that, at a given level of development of the productive forces, are used or can be used as means of production (objects and means of labor) and commodities. In their material form, these are objects and forces of nature, the genesis, properties and placement of which are determined by natural laws; in terms of their economic content, these are consumer values, the usefulness of which is determined by the degree of knowledge, the level scientific and technical progress, economic and social expediency of use.
The classifications of natural resources based on their genesis and method of use are of the most fundamental nature. By genesis, land, water, biological, mineral resources, resources of the World Ocean, etc. are distinguished.
In connection with the problem of limited reserves of natural resources, the importance of classification on the basis of their exhaustibility increases: exhaustible, including renewable (biological, land, water) and non-renewable (mineral) Natural resources; and inexhaustible natural resources (climatic, energy of flowing water, etc.)
Classification according to the method of use is based on the division of resources into sources of means of production and commodities: resources material production(resources of industry, including its individual branches, resources Agriculture and other industries) and resources of the non-productive sphere (including resources of direct and indirect use).
Due to the limited availability of free territories suitable for use, an idea arose of the territory as a kind of resource, which is considered from different positions: as a complex resource, a carrier of elementary (traditional) resources, with its size, location, natural and anthropogenic properties; as a special kind of elementary resource - a place, a spatial basis of activity. Land resources have always been the main asset of any country.
The land fund of Russia is the largest in the world - 1707.5 million hectares. In the structure of the land fund, the lands of agricultural enterprises and citizens engaged in agricultural activities account for 38.1%, 0.4% of the country’s territory is occupied by settlements, non-agricultural lands (industry, transport, communications, military facilities) account for 1.2%, natural reserve fund - 1.2, forest fund - 51.4, water fund -1, state reserve -6.9%.
The area of cultivated land in Russia is declining, but the provision of arable land per capita remains very high compared to other countries. Thus, in Russia it is 0.8 ha, while in the USA it is 0.6 ha, and in China and Egypt it is 0.09 and 0.05 ha, respectively.
Along with labor and capital, land is the most important factor of production. The term "earth" covers everything that is given by nature in a certain amount and over the supply of which man has no power, whether it be the earth itself, water resources or minerals. For a farmer, a plot of land serves as a means for growing certain agricultural crops, for a city dweller - a territorial platform for housing and industrial buildings.
The earth is for a person his habitat, a source of mineral and organic resources, a sphere of application of labor, capital and entrepreneurial skills. As a branch of material production, agriculture is organically connected with all other types of economic activity. From industry, it receives machinery, equipment, mineral fertilizers, pesticides, and for light and Food Industry serves as a source of raw materials. Agro-industrial integration, the organic connection of agriculture with related industries involved in servicing and bringing its products to the consumer, was the result of the development of productive forces, the deepening of the social division of labor, its specialization.
Land as the location of any enterprise appears to be the general condition of production. But land plot for agriculture, mine, mine, forestry, hydroelectric power station is already the main resource factor of production. Soil, climatic, geological, hydrological characteristics of land plots, their geographical location - the totality of natural differences in these conditions becomes of paramount economic importance. Natural differences are the basis for different labor productivity in industries where natural resources are the main material factor of production.
Differences in production efficiency determine the receipt by entrepreneurs of different incomes, which in turn leaves a seal on the relationship between the owners of resources and their users, and decisively affects the market prices of resources. Land rent is the central economic category that regulates economic relations between the landowner and the entrepreneur who rents land for agriculture on a capitalist basis.
Analysis of the formation of rent and allows you to find out the sources of income of these two subjects of rental relations, to reveal the influence of the natural factor and the legal form of ownership on the mechanism of the emergence of rent.
Land rent is represented by two main types:
differential rent;
absolute rent.
It should be borne in mind that the land fund of the country is limited; there is a limited amount of both all land in general and land plots of a certain quality.
Farms operating on the best land or geographically closest to the market are in an advantageous position compared to farms on the worst or remote sites, since their costs are much lower. This makes it possible to extract additional income, called differential rent ( natural fertility of the earth).
In addition to the natural fertility of the earth, there is economic fertility. It is associated with successive additional investments in it of capital and reflects the intensive path of development of agricultural production. Farms that make efficient use of capital investments and conduct intensive production receive differential rent.