25 dynamics of production costs in the short run. Production costs in the short run. Long-term production costs
At the heart of any economic decision lies the answer to the question: how to correlate what is spent on a particular project (costs), and what as a result of the project can be obtained in excess of the costs incurred (profit) Before deciding how much production to produce, the firm must analyze the costs.
Costs- ϶ᴛᴏ payment for the acquired factors of production. All costs can be divided into two groups: explicit and implicit. Explicit costs - ϶ᴛᴏ cash payments to suppliers of factors of production. These costs are fully reflected in the accounting of the enterprise, which is why they are also called accounting costs. Implicit costs - opportunity cost use of resources owned by the firm. The opportunity cost of producing goods and services is measured by the value of the largest missed opportunity used to create factors of production. It is worth noting that they can also act as the difference between the profit that could be obtained with the most profitable use of resources, and the profit actually received. Moreover, not all costs (monetary and non-monetary) act as opportunity costs. For any method of using resources, the opportunity costs are not considered, which the manufacturer bears without fail (the cost of renting premises, the costs associated with registering an enterprise, etc.) These non-alternative costs are not involved in the economic choice process. Explicit and implicit costs add up to economic costs. At the same time, not all costs incurred by the enterprise are included in accounting costs, since part of the costs is carried out by the enterprise at the expense of profit (income tax, bonuses paid by the enterprise at the expense of profit, material assistance to employees, etc.)
Similar to costs, profit can also be accounting and economic.
Accounting profit - ϶ᴛᴏ the difference between the revenue received and the accounting explicit costs. Economic profit is less than accounting by the amount of implicit costs.
There is the following ratio between accounting and economic profit:
All economic costs can also be divided into two groups: fixed and variable. Permanent costs - ϶ᴛᴏ economic costs, which do not change when the volume of production changes. It is worth noting that they do not depend on the number of products produced, and the enterprise will bear them even if it does not produce anything at all (for example, maintenance and management costs) Variables costs - ϶ᴛᴏ economic costs, which depend on the volume of production (for example, the cost of variable resources) The sum of fixed and variable costs gives gross costs.
Production costs, regardless of their type, determine the costs of production elements and the cost of a combination of production elements. The relationship between the output and the minimum necessary cost of its production is described by the cost function associated with the production function. The production function characterizes the relationship between the maximum possible output (Q) and the amount of applied labor input (3TP) and capital (K) Traditionally, a two-factor production function is used, which has the form: 
The graphical form of the production function is an isoquant, which shows various options for using any two costs, the combination of which will bring a given volume of production (Fig. 10.1) A series of isoquants that demonstrates the maximum achievable output for any this set factors of production, can be represented as a map of isoquants. 
Figure No. 10.1. Isoquant map.
The essence isoquant maps consists in the fact that the angle of inclination of the isoquant is the limiting norm of the technical replacement of one resource by another. The farther the isoquant is from the origin of coordinates, the greater the volume of release it is.
Production costs in the short run
To determine the degree of influence of each type of resources on the dynamics of output, the analysis of the production function in time periods is used.
It should be noted that the main criterion for the allocation of time periods is the speed with which the resources involved in production can change the quantitative and qualitative composition. There are instant, short-term and long-term periods.
V instant period, all costs are constant, since the product is released to the market and therefore it is no longer possible to change either the volume of its production or its costs.
V short term period, there is a division of costs into fixed and variable. Variable costs in the short term include cash costs for the purchase of raw materials, materials, labor costs for workers, etc. Fixed costs in the short term include: labor costs for the management staff, rent, depreciation of fixed assets.
V long term the company has the ability to purchase not only more raw materials, materials or increase the number of jobs in the enterprise, but also to make capital investments. Therefore, it is believed that in the long run, all costs will be variable.
Let's study in more detail the short-term period of the enterprise. In the short run, fixed costs do not change in response to changes in output. The dependence of the dynamics of constants and variable costs from the change in the volume of production is graphically presented in Fig. 10.2 and 10.3. 
Figure No. 10.2. Fixed costs. 
Figure No. 10.3. Variable costs.
Fixed and variable costs add up to total, or gross, production costs. Graphically, the dependence of total costs on the dynamics of output can be shown by overlaying the graphs of fixed and variable costs (Figure 10.4) 
Figure No. 10.4. General costs.
To measure the cost of production, the categories of average total, average fixed and average variable production costs can be used.
Average general costs are equal to the quotient from dividing total costs by the amount of products produced.
Average constants costs are determined by dividing the total fixed costs by the amount of products produced.
Average variables costs are determined by dividing the total variable costs by the amount of products produced.
Average costs are important in determining the profitability of a firm: if the price equals average costs, then there is no profit. If the price is higher than them, then the company has a profit in the amount of the ϶ᴛᴏth difference, if it is less, the company incurs losses and may go bankrupt.
To determine the maximum output that a firm can carry out, calculate marginal cost. This is the additional cost of producing each additional unit of output compared to the volume of output. Marginal cost is important in determining the strategy of a firm's behavior.
As you can see, all changes in the short term are associated with variable costs. The response of product output to changes in variable costs is determined the law of diminishing marginal productivity, which says: an increase in the costs of a variable factor from a certain moment gives an ever smaller increase in the volume of output.
Based on all of the above, we come to the conclusion that within the short-term period of the firm's activity, its production capacity is considered to be fixed. It is worth noting that she can use ϲʙᴏ and power more or less intensively, but the time available to her is not enough to change the size of the enterprise, therefore, in the short term, costs are divided into fixed and variable.
Long-term production costs
In the long-term period, all costs act as variables, since during the long-term time interval the volumes of not only fixed, but also variable costs can change. The analysis of the long-term time interval is carried out on the basis of long-term average and marginal costs.
Long-term average costs- ϶ᴛᴏ costs per unit of output, which can be changed in the optimal way.
It should be noted that the peculiarity of changes in long-term average costs is their initial decrease with the expansion of production capacities and an increase in production. At the same time, the commissioning of large capacities ultimately leads to an increase in long-term average costs. The long-run average cost curve on the chart bends around all possible short-term cost curves, touching but not crossing each of them. This curve shows the smallest long run average cost of production for each volume of output when all factors are variable. Note that each short-term average cost curve is for an enterprise whose size is larger than the previous one. A change in long-term average costs implies a change in the scale of production. Associated with these changes is the concept "Economies of scale". Economies of scale can be positive, negative and permanent.
It should be said - a positive economies of scale(economies of scale) arises when production is organized in such a way that long-term average costs decrease as the volume of production increases. It is precisely this organization of production that is possible only under the condition of specialization of production and management. Large-scale production allows more rational use of the labor of management specialists due to deeper specialization of production and management. Another important condition for economies of scale is the use of efficient technology.
Cause of occurrence negative economies of scale serves as a violation of control overly large-scale production... Under these conditions, long-term average costs increase as the volume of production increases.
In conditions when long-term average costs do not depend on the volume of output, there is constant economies of scale.
Long-term marginal cost associated with the production of an additional unit of output, when it is possible to change all factors of production in an optimal way. The change in marginal costs can be represented graphically as long run marginal cost curve(fig.10.5) 
Figure No. 10.5. Average cost curve in the long run.
This curve shows the increase in costs associated with the production of an additional unit of output when all factors of production are variable. The short-term marginal cost curves that apply to any fixed production will be below the long-term marginal cost curve for low production volumes, but higher for high production volumes, where diminishing returns are significant. The long-run marginal cost curve will grow more slowly than the short-run marginal cost curves of any given production. It is explained by the fact that all types of costs in the long run will be variable and diminishing returns are less significant. The long run marginal cost curve intersects with the long run average cost curve at a trough.
Based on the foregoing, we come to the conclusion that the long-term period for the firm will be sufficient for the firm to have time to change the amount of all resources used, including the size of the enterprise. Therefore, all costs in the long run are considered variable.
1. Production costs are divided into explicit and implicit (alternative) Explicit are monetary payments to suppliers of factors of production. These costs are fully reflected in the accounting of the enterprise, therefore they are also called accounting costs.
Implicit costs - ϶ᴛᴏ the opportunity costs of using the resources owned by the firm. The opportunity cost of producing goods and services is measured by the value of the greatest missed opportunity used to create their factors of production.
2. In the short term, there is a division of costs into fixed and variable costs. Variables in the short term include cash costs for the purchase of raw materials, materials, labor costs for workers, etc. Fixed costs in the short term include: labor costs for the management staff, rent, depreciation of fixed assets, etc.
3. In the long-term period, all costs act as variables, since during the long-term time interval, the volumes of not only fixed, but also variable costs can change.
In the process of producing goods and services, living and past labor is expended. Moreover, each firm seeks to obtain the greatest possible profit from its activities. To do this, each company has two ways: try to sell its goods at the highest possible price or try to reduce their production costs, i.e. production costs.
Depending on the time spent on changing the amount of resources used in production, there are short-term and long-term periods in the activities of the company.
Short-term is a time interval during which it is impossible to resize manufacturing enterprise owned by the firm, i.e. number fixed costs carried out by this firm. Over a short-term time interval, changes in the volume of output can result solely from changes in the volume of variable costs. It can influence the course and effectiveness of production only by changing the intensity of the use of its capacities.
During this period, the company can quickly change its variable factors - the amount of labor, raw materials, auxiliary materials, fuel.
In the short term, the number of some production factors remains unchanged, the number of others changes. Costs in this period are subdivided into fixed and variable costs.
This is due to the fact that the provision of fixed costs is determined by fixed costs.
Fixed costs... Fixed costs get their name due to their nature of immutability and independence from changes in the volume of production.
However, they belong to the category of recurrent costs, because their burden is on the firm on a daily basis if it continues to rent or own the production facilities that it needs to continue production activities. In the event that these current costs take the form of periodic payments, they refer to explicit monetary fixed costs. If they reflect the opportunity costs associated with owning certain productive capacities acquired by the firm, they are implicit costs. In the graph, fixed costs are depicted by a horizontal line parallel to the abscissa axis (Fig. 1).
Rice. 1. Fixed costs
Fixed costs include: 1) the cost of remuneration of management personnel; 2) rental payments; 3) insurance premiums; 4) deductions for depreciation of buildings and equipment.
Variable costs
In addition to fixed costs, firms also incur variable costs (Fig. 2.). Variable costs can change rapidly within an enterprise of a given size as output changes. Raw materials, energy, hourly wages are examples of variable costs for most firms. It depends on the specific situation which costs are fixed and which are variable.
Fig 2. Variable costs
Graphical interpretation of the company's costs in a short period.
Short term - this is a time interval insufficient for modernization or commissioning of new production facilities. However, during this period, the company can increase its output by increasing the intensity of the use of existing production facilities. It follows that in the short run, costs can be either constant (TFC) or variable (TVC). The sum of all fixed and variable costs is called aggregate or total costs(TS).
The TVC curve shows how variable costs change as output increases. At first, they increase at a low rate, then their growth accelerates. Such dynamics of TVC is explained by the action of the law of diminishing returns of production factors, according to which an increase in the marginal product at first requires less and less variable costs, since the marginal productivity of factors increases. But as soon as it starts to decline, for the production of each subsequent unit of output will require more and more variable resources.
The TC curve, which reflects the sum of fixed and variable costs, is located above the latter by an amount equal to fixed costs, i.e. it is parallel to the TVC curve. The TFC curve shows the dynamics of fixed costs, the value of which remains unchanged at any level of production.
In addition to general costs, the entrepreneur is interested in average costs, the value of which is always indicated per unit of output. Distinguish between average aggregate (ATC), average variables (AVC) and average fixed (AFC) costs.
Average total cost (ATC) is the total cost per unit of output that is commonly used for comparison with price.
Average Variable Cost (AVC) - it is a measure of the cost of a variable factor per unit of output.
Average Fixed Cost (AFC) - indicator of fixed costs per unit of output.
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Rice. 4.2. Relationship between average and marginal costs
As the volume of production increases average variable costs AVC first they decline, reach their minimum, and then begin to grow. Such dynamics of AVC is conditioned by the action of the law of diminishing returns of production factors.
Average fixed costs(AFC) decrease as the amount is distributed over an increasing number of products.
Average total (total) costs(ATC) first go down and then start to grow. This is because the average fixed cost over the short run decreases as output increases. Therefore, the difference in the height of the ATC and AVC curves for a given production volume depends on the AFC value. This follows from the equality: ATC = AFC + AVC
Marginal cost(MS) - the cost of producing an additional unit of production in excess of the already produced quantity. MC can be determined by referring changes in the sum of total costs to the number of units of production that caused these changes:
There is a certain relationship between marginal cost and marginal productivity (marginal product of MR). As long as the marginal product increases, the marginal (average variable) costs will decrease and vice versa. At the points of maximum values of the marginal and average products, the magnitude of the marginal MC and average variable AVC costs will be minimal.
There is a relationship between MC, AVC and ATC. If MC<АVС уже произведенной единицы продукции, то AVC будут снижаться при производстве и следующей единицы. Если же МС >AVC, then AVC will increase accordingly.
Manufacturer's win is equal to the total value of the excess of the selling price over the marginal production costs. Manufacturer win naming
Gossen's laws.
Through these laws, Gossen described the rules rational behavior a subject seeking to extract maximum utility from its economic activities.
The first question is what determines the value of utility? Gossen drew attention to the fact that utility depends not only on the consumer properties of the good, but also on the process of its consumption. The meaning of Gossen's first law: 1. in one continuous act of consumption, the utility of the next unit of the consumed good decreases; 2. with the repeated act of consumption, the usefulness of each unit of the good decreases in comparison with its usefulness at the initial consumption.
Plotting on the abscissa the units of some good, and on the ordinate of their utility, it is easy to construct the AC curve, which will express the decrease in utility during one act of consumption.
On this basis, Gossen concludes: "Individual atoms of the same consumer good have very different values."
The significance of Gossen's first law for economic science consists, first, in the fact that it allows one to distinguish between the general utility of a certain stock of a good and the marginal utility of a given good.
Secondly, the postulate of a decrease in the marginal utility of a good is a necessary condition for an economic entity to achieve a state of equilibrium, i.e. such a state in which he extracts maximum utility from the resources at his disposal.
The subject will be able to achieve a state of equilibrium if he is guided by second Gossen's law: to get the maximum utility from the consumption of a given set of goods for a limited period of time, each of them must be consumed in quantities such that the marginal utility of all consumed goods will be equal to the same value. If there is no such equality, then by redistributing the time allocated for the consumption of individual goods, it is possible to increase the overall utility.
Rice. 4. Decrease in the marginal utility of labor.
Gossen considers labor as a special good, the usefulness of which changes in full accordance with the first law. But unlike ordinary goods, the marginal utility of labor can reach negative values. “Any movement,” writes Gossen, “after we have rested for a long time, gives us pleasure at first. As it continues, this pleasure obeys the above-stated law of falling. pleasure, but the need to continue spending one's own strength gives a sensation opposite to pleasure. " In fig. 4 N 0 hours of work - "in joy", the further continuation of work - "a burden". When determining the optimal balance between free and working time, Gossen recommends adhering to next rule: "In order to achieve the greatest pleasure in life, a person must distribute his time and energy when achieving various kinds of pleasure in such a way that the value of the ultimate atom of each pleasure received would be equal to the fatigue that he would endure if he reached this atom at the last moment expenditure of their energy ".
Methodology used by Gossen to describe behavior economic actors, entered economics as a classical logic of decision-making, on the basis of which the actions of agents of the market economy are explained.
Manufacturer balance
Consumer balance.
Engel's curves.
The Giffen Effect.
This rather rare phenomenon, when consumer demand for a commodity that has risen in price increases, was first noticed in the middle of the twentieth century in Ireland: the population began to buy more expensive potatoes. Giffen's Merchandise - Low Quality cheap goods, which occupies a large place in the consumer basket of low-income consumers. When prices rise, their budget suffers so much that consumers abandon the more expensive substitutes they previously purchased, increasing the consumption of the more expensive product, which, nevertheless, remains the cheapest alternative. Its relative rise in price is offset by a decrease in the purchasing power of consumers due to an increase in its price, forcing consumers to buy the cheapest goods.
Production function.
Since the productive consumption of available resources is carried out in the production process, there is a functional relationship between the volume of production and the amount of consumed production resources. It can be expressed with production function. If the entire set of production resources is represented as the costs of labor, capital and materials, then the production function has the following form: Q = f (L'K'M), where Q is the maximum volume of products produced with a given technology and a given ratio of labor (L) , capital (K) and materials (M).
The production function expresses the relationship between the factors of production and makes it possible to determine the share of each of them in the creation of goods and services. By changing the ratio of factors, it is possible to find such a combination that will achieve the maximum volume of production of goods and services. In addition, it is possible to trace how the output of products changes with an increase or decrease in the use of certain factors of production by one unit and, thus, to achieve an optimal combination of factors and to identify the production capabilities of an enterprise.
Technology - it is the practical use of technology, equipment, physical and intellectual capabilities of the personnel of the enterprise. Each of the available production technologies a number of specific combinations of the factors used correspond.
Isoquanta (iso - the same, quant - quantity) is a curve, the points on which show various combinations of factors used, at which the same volume of production is produced. All of them together form an isoquant map, which gives a complete picture of the methods of production used. Each of the isoquants located to the right and above the base one shows an increase in the volume of output. Isoquants can pass through any point on the graph.
Isoquants reflect alternative combinations of input factors for the production of a certain volume of output. Isoquants indicate a firm's ability to accept flexibility manufacturing solutions, change the combinations of resources used. However, there are also limitations here. One of them is the duration of the time interval within which this production process takes place.
Short term call a time period during which a firm is not able to quantitatively change all of its production factors... In this case, some factors will be unchanging, fixed, others - changing, variable. A firm can influence the course and efficiency of production in the short term only by changing the intensity of the use of its variable factors (production capacity, labor, raw materials, auxiliary materials, fuel) or by changing their quantity.
Long term - a time period during which the firm is able to change the number of all factors used, including production capacity. At the same time, this period in its duration should be sufficient for some firms to be able to leave the industry, while others, on the contrary, to enter it.
Isoquant analysis can be used to determine the marginal rate of technological substitution, i.e. the possibility of replacing one resource with another in the process of their use.
Limiting rate of technological replacement(MPTS) expresses the number of units of a given resource that can be replaced by a unit of another resource while keeping the volume of production unchanged.
The limiting rate of technological substitution at any point of the isoquant is equal to the slope of the tangent at this point, multiplied by -1:
, where DК - reduction or increase in the capital resource; DL - reduction or increase in the resource of labor; Q is the volume of production.
The curvature of the isoquant helps the manager to determine exactly how much labor cost savings will be required during implementation. new technology production. The curvature of the isoquant reflects the difficulties that an enterprise faces when replacing one factor with another in the context of the need to maintain a given volume of production.
The proposal and its law
Supply is the desire and ability of the manufacturer to sell the product on the market. The volume (value) of the supply is the amount of goods or services that manufacturers are willing to sell at a certain price for a certain period of time.
The supply law expresses a direct relationship between the price and the amount of goods produced and offered for sale. If the price rises, then more goods will enter the market for sale and vice versa. In this case, the supply function has the form: QS = f (P), where QS is the supply value.
Qs = Qs (Pi, Pj ... Pn, T, t, N ...), where Pj ... Pn are the prices of other goods and production resources, T is the characteristic of the technology used, t is the tax rate, N is the characteristic natural and climatic conditions of production. Considering other factors unchanged, we obtain the supply function of the price: Qs = Qs (Pi). This function is usually set analytically (linearly Qs = -a + bPi), or graphically - in the form of a sentence line
The supply curve (S) is a set of points whose coordinates correspond to a certain price (P) and the value of the supply of goods (Q) characteristic of it (Fig. 4.1).
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Rice. 4.1. Supply curve
A price change, other things being equal, moves the point on the available supply chart, increasing or decreasing the supply. In fig. 4.1. as a result of an increase in price, the value of supply increases, which is displayed by moving from point A to point B.
Supply factors
The price determines the point on the supply chart corresponding to its certain value. The very same position of the curve on the graph depends on the non-price factors of the supply.
The change in the quantity of goods that producers are willing and able to sell, which occurs as a result of changes in non-price factors, is called a change in supply. A change in supply is indicated by a shift in the supply curve to the right (S1) if supply increases, or to the left (S2) if supply decreases (Fig. 4.2).
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Rice. 4.2. Changing the offer
Determinants of the proposal include:
1. Prices for the resources used.
If the prices for the resources used increase, then, other things being equal, the supply will decrease and vice versa, with a decrease in the prices of the resources, the supply increases.
2. Change in production technology.
The introduction of new equipment and technology leads to an increase in supply.
3. State economic policy.
Reducing tax rates increases market offer, and increasing, accordingly, decreases. The opposite effect on the offer is exerted by government subsidies and subsidies.
4. Changes in prices for goods produced from the same resources as this product. If the prices for such goods continue to rise, then the producers will reorient production by reducing the production of the given good, starting the production of the good, the price of which is growing. Thus, the supply of the initially produced product decreases.
5. Price expectations of sellers.
If prices are expected to rise, today this leads to a decrease in supply. Conversely, the expected decline in prices leads to an increase in the supply of goods at a given price.
6. The number of sellers. With an increase in the number of sellers on the market, the supply increases,
Utility and demand
A quantitative approach to utility analysis is based on the idea of the possibility of measuring various goods in hypothetical utility units ≈ yutils (from English... utility).
In particular, it is assumed: a consumer can say that his daily consumption of 1 apple brings him satisfaction, say, 20 juts, daily consumption of 2 apples ≈ 38 juts, daily consumption of 2 apples and 1 cigarette ≈ 50 juts, daily consumption of 2 apples, 1 cigarettes and 1 orange ≈ 63 snacks, etc.
It should be emphasized that quantitative assessments of the usefulness of a particular product or product set are exclusively individual, subjective. The quantitative approach does not imply the possibility of objectively measuring the usefulness of a particular product in utilities. The same product can be of great value to one consumer and no value to another. In the example above, we are talking, apparently, of a heavy smoker, since the addition of 1 cigarette to 2 apples significantly increased the usefulness of the commercial set. Quantitative approach usually also does not provide for the possibility of comparing the amount of satisfaction received by different consumers.
Economists have repeatedly tried to get rid of the term "utility", which has some evaluative character, to find a suitable replacement for it. Thus, the famous Russian economist N. Kh. Bunge suggested using the term "suitability" (Nutze ≈ it.). "The need for narcotic substances," he wrote, "is undoubted, but can we say that opium and hashish are useful for smokers? They are only suitable as a substance for intoxication." one
The Italian-Swiss economist and sociologist V. Pareto proposed replacing the term "utility" with the neologism ophelimite, formed by him from the Greek iojelimoz, meaning the correspondence between a thing and a desire. French economist Ch. Gide suggested using the term "desirability" (desirabilite ≈ fr.), believing that he "does not assume that desire has moral or immoral traits, reasonable or reckless." 2
The well-known American economist and statistician I. Fisher also expressed his support for the term "desirability". "Utility," he believed, "is the legacy of Bentham and his theory of pleasure and pain." 3 Fischer also pointed out the preference of the antonym "undesirable" over "useless". (The antonym "anti-utility" used in our modern literature is quite unfortunate).
Nevertheless, the term "usefulness" outlived its critics and is still used today.
So, in the quantitative theory of utility, it is assumed that the consumer can quantify the utility of any commodity he consumes in terms of utilities. Formally, this can be written as a function overall usefulness:
TU = F (Q A, Q B, ..., Q Z), (3.1)
where TU≈ the general usefulness of a given commodity set; Q A, Q B, ┘, Q Z≈ volumes of consumption of goods A, B, ..., Z per unit of time.
Assumptions about the nature of the general utility function are of great importance.
Let's fix the volumes of consumption of goods B, C, ..., Z... Consider how the total utility of a product set changes depending on the volume of consumption of the product. A(like apples). At the top of Fig. 3.1, a shows this dependence. Segment length OK is equal to the utility of the commodity set with the volumes of goods fixed by us B, C, ..., Z and at zero consumption of goods A... In quantitative theory, it is assumed that the function TU at the top of fig. 3.1, but increasing (the more apples, the more utility the product set has) and convex upward (each subsequent apple increases the overall usefulness of the product set by a smaller amount than the previous one). In principle, this function can have a maximum point ( S), after which it decreases (imagine that you are forced to consume 100 kg of apples every month).
At the bottom of Fig. 3.1, a shows the dependence of the marginal utility of apples on the volume of their consumption.
Marginal utility≈ this gain in overall utility a set of commodities with an increase in the volume of consumption of a given commodity by one unit.
Mathematically, the marginal utility of a commodity is a partial derivative of the total utility of a commodity set (3.1) with respect to the volume of consumption of the r-th commodity:
Geometrically, the value of the marginal utility (the length of the segment ON) is equal to the tangent of the angle of inclination of the tangent to the curve TU at the point L... Since the line TU convex upward, with an increase in the volume of consumption of the r-th commodity, the angle of inclination of this tangent decreases and, consequently, the marginal utility of the commodity also decreases. If at a certain volume of its consumption (in our figure Q▓ "A) the function of total utility reaches its maximum, then at the same time the marginal utility of the product becomes zero.
The principle of diminishing marginal utility is often called first Gossen's law, named after the German economist G. Gossen (1810-1859), who first formulated it in 1854. 4 This law contains two provisions. The first states the decrease in the utility of subsequent units of good in one continuous act of consumption, so that in the limit, full saturation with this good is achieved. The second states the decrease in the utility of the first units of the good with repeated acts of consumption.
The principle of diminishing marginal utility is essentially analogous to the so-called basic psychophysical Weber-Fechner law, 5 which characterizes the relationship between the strength of a stimulus (stimulus) and the intensity of sensation. According to this law, stimuli of equal intensity, repeated for a certain time, are accompanied by a decrease in the intensity of sensations.
The principle of diminishing marginal utility is that with an increase in the consumption of one good (with a constant volume of consumption of all the others), the total utility received by the consumer increases, but grows more and more slowly. Mathematically, this means that the first derivative of the total utility function with respect to the amount of the given good is positive, and the second is negative:
However, the principle of diminishing marginal utility is by no means universal. In many cases, the marginal utility of subsequent units of the good first increases, reaches a maximum and only then begins to decrease... This dependence is typical for small portions of divisible goods. The second puff of a cigarette smoked in the morning may be more useful for the amateur than the first, and the third more than the second.
This situation is shown in Fig. 3.1.6. In the range from zero to Q "A the total utility increases faster than the volume of consumption of the good increases, and the marginal utility also grows. In the range from Q "A before Q▓ "A the total utility grows more slowly than the consumption volume, and the marginal utility decreases from the maximum level (at the point L ") to zero. Mathematically, this means that in the region from zero to Q "A both the first and second partial derivatives of the total utility function with respect to the volume of consumption of this good are positive:
Thus, the principle of diminishing marginal utility, or Gossen's first law, is valid only if the second partial derivative of the total utility function is negative. However, since the consumer buys on the market not individual acts of consumption (in our example, puffs), but certain goods (in our example, cigarettes), we can assume that for goods circulating on the market, Gossen's first law (3.3) is fulfilled.
Suppose now that the consumer has some income; commodity prices A, B, ..., Z do not depend on his behavior and are equal, respectively P A, P B, ┘, P Z commodity deficit No; all goods are infinitely divisible (such as sausage, butter, etc.).
Under these assumptions, the consumer will achieve maximum satisfaction if he allocates his funds for the purchase of various goods in such a way that:
1) for everyone it is real purchased them goods A, B, C,... takes place
where MU A, MU B, MU C≈ marginal utilities of goods A, B, C; l ≈ some value characterizing the marginal utility of money; 6
2) for everyone unsustainable them goods Y, Z,... takes place
Let us prove the first part of the statement.
Suppose the opposite: goods A and V actually bought by the consumer, but MU A / P A> MU B / P B... For definiteness, suppose that MU A= 40 yutils per kilogram, P A= 2 rubles. per kilogram, MU B= 20 yutils per kilogram, P B= RUB 4 per kilogram. As a result
(MU A/P A= 40 yutilov / 2 rubles)> (20 yutilov / 4 rubles = MU B/P B
Obviously, the customer does not achieve the maximum satisfaction. It can reduce the consumption of goods V by 1 kg, while he will lose 20 yutils. But at the expense of the saved 4 rubles. he can buy additional 2 kg of goods A and get an additional 80 yutils. (The word "about" is used here because the 2nd additional kilogram of the item A can bring less utility than the 1st, say, only 39 yutils, not 40). The net winnings will be approximately 80 - 20 = 60 yutils. With a decrease in consumption of good B, its marginal utility decreases. Therefore the difference between MU A/P A and MU B/P B will shrink. Redistribution of costs will occur until the ratio of marginal utility to price for each actually purchased good becomes the same.
Equality (3.4) can be interpreted as follows. Attitude MU A/P A represents an increase in total utility as a result of an increase in consumer spending on a product A for 1 rub. Obviously, in the state of the consumer's optimum, all such relations for actually purchased goods must be equal to each other. And any of them can be seen as marginal utility of money(more precisely, 1 rub.). The magnitude A shows how many utilities the total utility increases with an increase in consumer income by 1 ruble.
The second part of the statement can be proved in a completely analogous way, by contradiction. The meaning of formula (3.5) is that if there is already 1 ruble spent on the purchase of goods Z, brings the consumer an insufficiently high utility, then he generally refuses to consume this product.
Thus, equality (3.4) shows that at the optimum (maximum utility for given consumer tastes, prices, and incomes), the utility derived from the last the monetary unit spent on the purchase of any product is the same, regardless of what kind of product it was spent on. This provision is called second Gossen's law... Of course, the consumer can repent of a purchase, even one that satisfies equality (3.4). This will mean that "during the time from the purchase to the repentance of it" the sign in (3.4) for the given product has changed to the opposite. 7
Let us now try to show on the basis of a quantitative approach that the volume of demand and price are inversely related. Consider equality (3.4) again.
Let us assume that the price of the goods purchased by the consumer A increased. As a result, the first relation in equality (3.4) has decreased. In order to restore equality (3.4) and maximize the total utility, the consumer will begin to reduce the consumption of the goods A... Other consumers will do the same. Thus, with an increase in the price of a product, the volume of demand for it decreases. eight
Production costs in the short run.
Marginal cost () is the cost associated with producing an additional unit of output. Marginal cost reflects the changes in costs that would result in an increase or decrease in production by one unit.
2. Cost dynamics
In the classification of costs, an important place belongs to the category of marginal costs. Marginal costs characterize the increase in total costs associated with the release of an additional unit of output.
Total variable costs are equal to the sum of all marginal costs. Marginal cost equal to the difference between two adjacent values of total variable costs, or MC=∆TVC / ∆Q.
where MC is the marginal cost,
TVC - Total Variable Cost.
Note that the same marginal cost values could be obtained if, instead of total variable costs, the calculation was carried out in terms of total costs. This is due to the fact that in the short term, any change in total costs is solely due to changes in variable costs, the total fixed costs, as you know, do not change their value.
The most important factor in determining a firm's ability and desire to put a product on the market is the cost of production. Cash expenses that the company incurs in favor of some external organizations are called explicit costs. Expenses for the consumption of own, internal resources are implicit costs. For example, for the owner of a small shop where he works himself, there are explicit costs of purchasing goods, but there are no explicit costs of renting premises and wages. Implicit costs in this case represent the income that the owner of this store could receive if he rented this premises and received a salary somewhere
Based on these circumstances, the cost analysis is usually carried out in two time intervals: short term(when the amount of a certain resource remains constant, but the volume of production can be changed by using more or less resources such as labor, raw materials, materials, etc.) and in long term(when you can change the amount of any resource used in production).
The difference between the short and long run is exactly the same as the difference between fixed and variable factors of production.
Variable factors of production- factors of production, the number of which can be changed within the short-term period (for example, the number of employees).
So, in the short term, there are:
fixed costs(TFC) the value of which does not depend on the volume of products (depreciation deductions, interest on a bank loan, rent, maintenance of the administrative apparatus, etc.). We are talking about the cost of resources related to constant factors of production. The magnitude of these costs is not related to the volume of production. Fixed costs exist even when production activities the enterprise is suspended, and the volume of production is zero. An enterprise can only avoid these costs by completely ceasing its activities;
variable costs(TVC), the value of which changes depending on the change in the volume of production (costs of raw materials, materials, fuel, energy, wages of workers, etc.). We are talking about the cost of resources related to variable factors of production. With the expansion of production, variable costs will increase, since the firm will need more raw materials, materials, workers, etc. fixed costs remain unchanged.
The difference between fixed and variable costs is essential for every businessman: he can manage variable costs, fixed costs must be paid regardless of the volume of production, even if production is suspended.
In addition to fixed and variable costs in the short term, one more type of costs is distinguished - gross(cumulative, cumulative, total). Gross Costs (TC)- the sum of fixed and variable costs, calculated for each given volume of production: TC = TFC + TVC.
Gross Costs (TC) is the sum of fixed and variable costs.
In addition to gross costs, the entrepreneur is interested in the costs per unit of output, since it is they that he will compare with the price of the goods in order to get an idea of the profitability of the firm. The cost per unit of production is called average. This group of costs includes:
Average Fixed Cost (AFC) are determined by dividing the total fixed cost (TFC) by the quantity of products produced. AFCs fall as production increases
AFC = TFC / Q
Average Variable Cost (AVC) are determined by dividing the total variable cost (TVC) by the quantity of products produced. AVCs first fall, reaching their minimum, and then start to rise, because TVC obey the law of diminishing returns.
AVC = TVC / Q
Average Total Cost (ATC) calculated by dividing the sum of total costs by the quantity of products or as the sum of AFC and AVC.
Long term:
Over a long period, all factors of production can be changed: a firm can change the scale of its production capacity by setting optional equipment or leaving less equipment. In addition, new firms can enter the industry or leave existing ones. Therefore, in the long run, there is no distinction between fixed and variable costs. In the long run, the influence of the scale of the enterprise and the volume of its production on the dynamics of average costs can be both positive and negative. As a rule, in the long run costs, as the enterprise expands, first fall, reach a minimum, and then rise again. The curvature of the curve can be explained in this case not by the law of diminishing returns, but by the positive or negative effect of the growth in the scale of production. Positive effect scale(savings from mass production) is observed under the influence of the following factors: the labor of workers is specialized; with the expansion of production, the need to combine professions disappears and the loss of time for the transition to different jobs, operations is reduced, skills are acquired, an opportunity is created to get a job at will; managerial labor is specialized and saved; more efficient use of equipment, machinery, in general, fixed and working capital; the possibility of using more efficient and expensive equipment is expanding. Negative economies of scale arises with such an organization of production, when long-term average costs increase as the volume of output increases. Its main reason is associated with the weakening of control, coordination of the activities of various parts of the company. The managerial staff becomes numerous, top management moves away from production process... This reduces efficiency, clarity of management, and increases direct and overhead production costs.
Have large firms there are more opportunities for survival in times of crisis, in the fight against competitors. They seek to "circumvent" the negative economies of scale of production: they use computers to process information, train personnel better, and create several autonomous divisions. These and other measures can block negative economies of scale of production.
20. Types of profit. Accounting and economic profit.
Profit - the difference between total income and costs (costs).
It is necessary to distinguish between accounting and economic profit.
Accounting profit - the difference between total income and accounting (explicit) production costs.
Economic profit - the difference between total income and the amount of accounting (explicit) and economic (implicit) costs.
Economic profit is a criterion for determining the state of affairs of the company, its success. If an enterprise has not only accounting, but also economic profit, then it develops dynamically and rationally increases investments.
NORMAL PROFIT - 1) profit on invested capital, which could be obtained if the capital was used in the simplest, usual way, that is, provided in the form of a loan, lease; 2) the costs of the entrepreneur, not included in the costs, not reflected in the business costs according to the accounting documentation, conditionally included in the accounting profit.
We proceed from the following assumptions: in the market perfect competition, the factors of production and the level of technology are not changed, each subsequent unit of the variable resource is homogeneous.
The short-term period is a rather short period, during which time the company can change the amount of resources involved and can change the volume of production, but cannot change the size of its enterprise and production capacity.
The law is in force "Diminishing marginal returns or productivity": starting from a certain moment, the successive addition of units of a variable resource (labor) to constant resources (land, capital), gives a decreasing additional or marginal product per each subsequent unit of a variable resource.
Persistent resources - change very slowly over a certain period of time, require large investments. Variable resources - change quickly and easily.
Therefore, costs in the short run are divided into fixed and variable.
Fixed costs (FC)- these are costs, the value of which does not depend on the volume of production. These include: rent, depreciation, insurance premiums, taxes, interest on a loan, wage management personnel. They not subordinate the law of diminishing marginal returns. Even if the firm does not manufacture products, there are always fixed costs.
Variable Cost (VC)- these are costs, the value of which depends on the volume of production. These are raw materials, energy, transport, fuel, workers' wages. Variable costs are subject to the law of diminishing marginal returns (productivity).
Total Cost (TC) Is the sum of fixed and variable costs for any volume of production. At zero production, they are equal to fixed costs.
TC = FC + VC
Table 1 shows the dynamics of total, average and marginal costs of an individual firm in the short run.
Table 1
| Volume of production | Fixed costs | Variable costs | Total costs | Average fixed costs | Average variable costs | Average total costs | Marginal cost |
| (Q) | (FC) | (VC) | (TC) | AFC | AVC | ATC | MC |
| – | – | – | – | ||||
| 33,3 | 113,3 | ||||||
| 16,7 | 91,7 | ||||||
| 14,3 | 77,2 | 94,5 | |||||
| 12,5 | 81,3 | 93,8 | |||||
| 11,1 | 86,7 | 97,8 | |||||
In Figure 1, data on fixed, variable and total costs from Table 1 are presented graphically. Note that adding fixed costs to the variable costs along the vertical allows you to locate the total cost curve.
Picture 1
Manufacturers are concerned not only with the total costs, but also with the average ones. It is the indicators of average costs that are more appropriate to use for comparison with the price of a product, which is always set per unit of production.
Average total costs (ATC / AS) Is the cost per unit of production.
Average fixed costs
Average variable costs
ATC = AFC + AVC
Average fixed, average variable and average total costs are shown in columns 5, 6, 7 in Table 1, and the average cost curves in Figure 2.
Figure 2.
Marginal cost (MC)- these are additional costs associated with the production of one more additional unit of production. For each additional unit of product, the marginal cost can be determined simply from the change in total costs caused by the production of that unit:
MC- shows the costs that the firm will have to incur in the case of the production of the last unit of output, and at the same time the costs that can be saved in the event of a reduction in production for this last unit. Marginal costs are subject to the law of diminishing marginal returns (productivity).
The marginal cost is shown in Table 1 in column 8 and in Figure 2.
Output decisions are usually based on margins, i.e. they are decisions about whether to produce one unit more or one less product. Combined with the indicator marginal income(MR) The measure of marginal cost allows a firm to determine the profitability of a given change in production scale.
MC crosses ATC and AVC at their minimum points. If the MC is less than or below the curves of ATC and AVC, then ATC and AVC decrease. If the MC is greater or higher than the curves of ATC and AVC, then ATC and AVC increase (see Figure 2).
Indeed, as long as the cost of producing an additional unit of output is less than the average variable cost of the previous unit, an increase in output will reduce the AVC values. If the cost of an additional unit is higher than the average variable cost of production of the previous unit, the new AVC values will increase. Thus, approaching the point of intersection with the MC, the AVC curve falls, and after passing it, it rises. The AVC minimum is reached at the intersection point.
The volume of production corresponding to the minimum average total costs is called point of technological optimum... It is achieved when the proportion of variable and constant resource is optimal from the technical point of view. Note that this is not necessarily the optimal output from the point of view of the firm's economic interests. The economy is the more efficient, the closer the real output of firms to the points of their technological optimum.
The MC curve of marginal cost is a reflection of the MC curve of marginal productivity. At this level prices for variable resources, an increase in marginal productivity (MR) will be expressed in a drop in marginal costs (MC), and a drop in MC will be expressed in an increase in MC.
