Boundary of production opportunities: concept. Production opportunity curve

Resources that are used for the production of one product can not be used simultaneously for the production of another. In connection with the fact that in the manufacture of products X funds that could be used to create products Y, the increase in the volume of some goods will entail a reduction in the number of others. This manifests economic limitations - the border of production opportunities in particular. Let us consider this limit in more detail.

General information

If for the release of a unit of commodity X is required to abandon the production of a certain volume of production Y, the latter will determine the cost of lost opportunities for manufacturing the first or alternative cost. But in any economic system not only these types of goods are created, but many others. In this regard, the alternative cost is expressed through a common unit of measurement - money.

Boundary of production opportunities: schedule

At each point of the line AE, it is reflected how much of the goods X and Y can be created using limited funds in full. This line is the production capacity curve. If all the funds go to produce the first product, then it will be issued E units, and not a single unit - the second. At point A, all resources will be focused on producing product Y, and X will not be created at all. On all other sites it is necessary to make a choice. It is necessary to determine how much to produce the commodity X due to the refusal to manufacture a certain volume Y. Each point of the line AE reflects all the permissible release relations using all available means to the fullest. Points that are located inside it indicate incomplete use of available funds. All that lies beyond the boundaries of production opportunities in the economy is considered unattainable for a given amount of funds.

Clarification of concepts

The production capacity curve reflects 4 fundamental provisions. It points out the limitations of means, the need to make choices, the availability of costs of missed opportunities and their increase with the increase in the volume of output of goods. When moving along the border of opportunities to the right and down, thus changing the production structure in favor of increasing the quantity of production X, the volume of the commodity Y increases, from which it is necessary to refuse. The decision on how to manufacture, provides for the achievement of commodity or technological efficiency - the creation of products by the cheapest method. The implementation of the consumer task - the answer to the questions "for whom to release" and "how to distribute products" - requires an optimal balance of equity and profitability of distribution. The latter is considered achieved when, through the redistribution of benefits, it is impossible to improve the welfare of one individual, while not reducing the quality of life of another. This principle is called Pareto efficiency. From the used distribution principles, from the amount of remuneration for participation in the production process depends:

• Motivation of entrepreneurs;
• Degree and supply of labor productivity.

The problem of justice

It arises along with the question of the efficiency of distribution in the process of solving the consumer problem. There are two opinions on this issue. The first point of view suggests that equality is the basis of justice. This is a situation in which all profits and the entire volume of production are distributed equally in the society. According to another opinion, the distribution can be considered fair when the conditions of private property are observed, and there is no sexual and racial discrimination. This situation contributes to the formation of equality of opportunity, which is more important than the equality of profits. However, in this case, the low income of those who do not have property and capable members of society also have to be recognized as "fair."

The problem of insufficient funds

Considering the above, it can be concluded that the limit of production opportunities is the limit at which there is a need for choice. This problem, in fact, is a competition between alternative uses of scarce funds. By and large, economic constraints - the border of production opportunities, shortage of funds - are the main problem of the economic sphere. Achieving productivity in the use of assets contributes to making decisions about what products and services, in what volume should be produced to meet different needs. There are two aspects to this problem:

1. Production efficiency, which allows you to determine how to produce goods.

2. Productivity in distribution, decisive task, for whom and how much to produce.

The law of increasing alternative costs

It is considered one of the most fundamental in the management system. The boundary of production capabilities shows that when each additional product is produced, there is a tendency for an increase in the opportunity cost. The effect of this law is due to the impossibility of absolute interchangeability of funds. The boundary of production opportunities indicates the heterogeneity of assets. Not all funds can be switched equally easily from the production of one product to another.

Possible solutions to the problem

The above are the factors indicated by the boundary of production opportunities. The economic meaning of entrepreneurship is the desire to meet the needs of society with maximum profit. However, in the constantly developing market conditions, the question arises: "Can the production capacity boundary move?" This is quite realistic. The limit of production opportunities may be higher provided:

1. Increase the amount of funds available to the country.

2. Perfection of the technology of output.

3. Improvement of the organization of economic activity.

4. Involve people in hard work.

All these methods have definite names:

• Extensive method. It provides for the expansion of resources.
• Intensive method. In its framework, more rational use of assets is carried out.
• Non-economic method. It is based on the formation of unduly tense work conditions without regard for the interests and will of the population. This method can ultimately lead to the complete destruction of labor assets that are available in the society. This, in turn, will contribute to the fact that the limit of production opportunities will again be lower.

Absolute use of assets

In the full-employment economic mode , all areas of possible combinations of manufacturing of two products are located at the border of production opportunities. If the society spends all the money on the creation of consumer goods, then it can get their maximum amount, while completely refusing to do it. If you use the same resource-technological maximum, you can achieve the opposite result. In the latter case, only the leisure industry will exist in society. Between these extremes, there are a large number of resource allocation combinations in both the one and the second industry. At any point to produce more than one product, while not affecting the output of another, it is impossible. The number of consumer goods and leisure spheres are not only alternative, but also serve as interchangeable in the framework of insufficient resources.

Conclusion

The company, which is at the considered maximum limit of production capacity, due to the lack of necessary assets, can not simultaneously increase the output of consumer goods and services. This task is achieved in conditions of economic growth. In the case of incomplete loading of production capacities or with unemployment, different combinations of options for the release of goods are not located on the transformation line, but inside it. This indicates that with the use of additional assets, it is possible to increase production in both areas under consideration.

Finally

In an innovative economy, neoclassical traditional methods of investigating production processes become inappropriate because the concepts of work and leisure are rather blurred. In this regard, as a primary task of science should be the improvement of existing and the development of new models of the labor market for the formation of a coherent, holistic concept. It should reflect trends in the development of an innovative economy of a modern type. It should, first of all, take into account the changes that occur in the system of society's needs. It is about achieving satisfaction of material needs and highlighting social needs, aspirations for self-realization and self-expression of the individual. As a result of these changes, the non-monetary aspects of the labor market relations become more important. These include, first of all, the conditions and content of work, opportunities for professional growth, creative self-realization of employees in the production process. All this has a significant impact on the volume of output, motivation that drives entrepreneurs, forcing them to improve technological processes, to introduce innovative programs for the development of the enterprise. All this, in turn, contributes to the expansion of production opportunities and the transition of the management system to a qualitatively new level.