Introduction
The economic science studies possibilities of the best use of limited resources for the greatest satisfaction of boundless requirements. The Focus of Investigation a problem of realization of production capabilities or a problem of economic efficiency.
The essence of the problem of economic efficiency
Economic efficiency reduced is to maximizing the results of economic activity while minimizing costs. It presupposes full use of resources suitable for use; the optimal distribution of these resources among enterprises, branches and regions from the point of view of the greatest satisfaction of monetary needs by their volume and structure; applying the best available technologies to attract these resources.
Economic choice occurs when the economic entity takes into account the relationship between the economic resources used, on the one hand, the quantity and quality of the created economic benefits that can meet economic needs, on the other hand. This relationship between the economic resources expended and the benefits produced is expressed in the concept of "production efficiency".
The economic resources are spent for the production of the chosen volume of goods or the more the economic goods needed by consumers from these limited economic resources are created, the higher the efficiency of production. In a market economy for an economic entity, efficiency will be expressed in maximizing income, including profits, with the given monetary investments in economic activities.
If you use table and graphic forms to illustrate the production opportunities created, the result of this application shown can be on the hypothetical data. To simplify and demonstrate the key part of the problem, we introduce the following assumptions: all resources are quantitatively and qualitatively unchanged (in fact, they are constantly changing), all resources occupied are fully (in fact, there is unemployment), technologies for the use of resources do not change (in fact, there are constant technological innovations).
As an illustration of the economic theory, not a huge set of products proposed is, but only two of them (for example, soda, on the one hand, and pizza as a product – on the other).
It demonstrates that in the conditions of the accepted assumptions:
First, any point, which is between axes and the most curve, fixes inefficient use of resources. Secondly, any point located more to the right of and above a curve will be unattainable, i.e. goes beyond the available opportunities, and, thirdly, any point reflects the effective realization of cash opportunities in the cost curve. However, there is a question: what point from those, which make a curve of production capabilities, is optimum, and i.e. expresses the best structure of production from the point of view of the ratio of volumes of production of soda and pizza taken for an of example?
Discussion
The economic science directly does not answer the matter without further specification of conditions. She only claims that at the specified assumptions all points located on a curve and the number of productions of two these products adequate to them reflect effective use of production capabilities. The concrete answer depends on those conditions in which there was society, and from those values and priorities what in it were established. In turn, these values and priorities belong to questions of social and economic policy and set are by the political forces dominating in each society. If in political circles values of the current consumption prevail, then the point of optimum application of production capabilities found will be on a curve, is closer to a horizontal axis. On the contrary, when priorities of the accelerated progress of productive forces dominate, then the point settles down on curve effective realization of production capabilities, is beside closer to a vertical axis. Movement of a point by a curve of production capabilities is defined both by a degree of prevalence of the corresponding values, and the ability of switching of resources from one product on others (Ali, Egbetokun, & Memon, 2018, 2).
Due to the switching of production from one product to others in an economy, the concept of the so-called imputed costs is entered. The imputed costs directly defined are not by costs of resources of creation and sale of the corresponding product. There is a law of increase of the imputed costs. It is well looked through in table 1. Moving from option A to option E, we on each additional unit of production of pizza refuse escalating amount of soda; and moving in the opposite direction, we receive the lesser gains of production of soda for refusal of production of the identical amount of pizza that is the return expression of the same. The law of increase of the imputed costs is explained by the fact that resources are not completely interchangeable, i.e. are not quite suitable (sometimes, in general, are unsuitable) for production alternative products. Therefore when switching less and less suitable resources for the production of alternative products receive their lesser gains in comparison with the quantity of those products for which creation these resources intended earlier (Teece, 2017, 7).
Conclusions
However, about writing the imputed costs, it is necessary to notice that this concept torn very off is from daily economic practice and is not comparable to a factor cost of resources, a work expense on production and realization of products. The imputed costs not connected are with a determination of prime cost while without expenses of material and personal factors of production it is impossible to count both prime cost of a product, and all its components, and many other indicators of economic activity.
Too speculative, very abstract character of the imputed costs and the law of their increase is caused by those abstract assumptions on which the table and a curve of production capabilities are based. It becomes obvious when we refuse the specified assumptions.
When we do not begin to assume more the quantitative and qualitative invariance of resources (that corresponds to realities), then:
First, there will be mobile a curve of production capabilities, being displaced to the right or to the left depending on increase or reduction of resources,
Secondly, will be less rigid or even, in general, the problem of switching resources from the production of one product on the creation of others will recede into the background.
If we refuse the assumption of the invariance of technologies (that too answers reality), then we will come to the same logical results what were listed in the first point. Only in this case these results explained are not by the mobility of resources in the quantitative and qualitative relations, and their release and improvement in connection with technological progress. Of course, technical progress can be replaced by stagnation, and sometimes and regress (Zawislak, et al., 2012, 18).
References
Acemoglu, D., Laibson, D. I., & List, J. A. (2018). Economics. New York, NY: Pearson.
Ali, M., Egbetokun, A., & Memon, M. (2018). Human Capital, Social Capabilities and Economic Growth. Economies,6(1), 2–18. doi:10.3390/economies6010002
McEachern, W. A. (2017). Economics: A contemporary introduction. Boston, MA: Cengage Learning.
Teece, D. J. (2017). A capability theory of the firm: An economics and (Strategic) management perspective. New Zealand Economic Papers, 1-43. doi:10.1080/00779954.2017.1371208
Zawislak, P. A., Alves, A. C., Tello-Gamarra, J., Barbieux, D., & Reichert, F. M. (2012). Innovation Capability: From Technology Development to Transaction Capability. Journal of Technology Management & Innovation, 7(2), 14-27. doi:10.4067/s0718-27242012000200002