Maximizing profits in the resource market. Market of economic resources. Rule of resource use Elasticity of demand for resources

23.12.2023 | Internet

Marginal profitability and marginal cost of a resource. Resource supply and demand curves.

The market for resources or factors of production is a set of markets where the objects of purchase and sale are resources used in the process of manufacturing goods. All resources are combined into the following three groups: natural, labor and investment (land, labor, capital). The number of markets specializing in their sale is large, since there are many markets for each specific resource.

Resource markets play an important role in the economy for the following reasons:

1) distribute limited resources for the production of final goods;
2) generate cash income from resource sellers;
3) determine the level of production costs for the buyer of resources.

Demand for factors of production is the desire and ability of buyers to purchase factors of production, i.e. quantity is expressed in monetary terms. The peculiarity of the demand for factors of production is that it is derivative in nature, i.e. depends on the demand for goods in the consumer market, because Firms buy resources not for their own consumption, but to use them in the production of goods and services.

The volume of demand for resources depends on three components:

- productivity (the return of a given resource, i.e., how many products can be produced using one unit of the resource);
- prices of goods produced with its help;
- the price of the resource itself and, accordingly, the costs that the company will incur on its consumption.

It is necessary to distinguish between price and non-price factors of demand.

The price factor is a change in the quantity demanded, which leads to the movement of points along the curve. A change in the price of a resource, with other conditions remaining unchanged, leads to a change in the volume of demand. When the price increases, the quantity demanded decreases.

Non-price factors are changes in demand itself.

Price elasticity of demand is the ratio of the percentage change in a consumed resource to the percentage change in its price or the degree of response of the volume of consumed resources to the degree of price change. Elasticity is measured using the elasticity coefficient (in absolute terms, as a percentage).

The price elasticity of demand is affected by:

1. Price elasticity of demand for the finished product.
2. Share of resource costs in total costs. The greater the share of total production costs that a given resource accounts for, the higher the elasticity of demand for that resource.
3. Substitutability of resources: the more substitute a resource has, the higher the elasticity of demand for it. Demand is more elastic for those factors of production that have a lower price.

Varies:

Individual demand; - industry demand; - market demand.

The marginal profitability of a resource (income from the sale of the marginal product) is the increase in enterprise income due to the involvement of an additional unit of resource in the production process. With diminishing returns to a resource, income growth is reduced. Consequently, the scale of an enterprise's use of resources depends on the dynamics of their marginal profitability.

The marginal cost of a resource represents the increase in costs resulting from the involvement of an additional unit of a variable resource in production. The dynamics or lack thereof in relation to the marginal cost of a resource depend on the market structure of each specific resource. The enterprise will increase the purchase of a resource until the marginal profitability of its use exceeds the marginal costs associated with its acquisition, and will stop doing this as soon as the marginal profitability of the resource is equal to its marginal cost.

MRP (marginal return on a resource) is the increase in output in monetary terms as a result of using an additional unit of a resource. MRPL (marginal return to labor).

If a product is sold in a perfectly competitive market, then MRP calculated by the formula:

MRP=MP*P ,

Where MR R- the price of the produced goods.

MRPL = MPL*P ,

Where MPL- marginal product of labor, R- price of goods produced
In conditions of imperfect competition

MRP=MR*MR ,

Where MR - marginal product of the resource, M.R. - marginal profitability of the product;

MRPL= MPL* MR .

Rule for using resources:

It makes sense to additionally involve a resource in production as long as MRP can't compare with

MRC (MRP= MRC),

Where MRP- marginal profitability of the resource, MRC- marginal cost of the resource.

A firm's demand for production resources under conditions of perfect competition is shown by a curve that depicts how the volume of resources needed by the firm changes when prices for them change and other factors influencing demand remain unchanged.

The activity of any company begins with entering the market of production factors. Therefore, it is necessary to find out the specific conditions for the functioning of the resource market.

The totality of economic resources includes key production factors - labor, capital and natural resources.

Resource Market – it is a market in which, as a result of the interaction of supply and demand, prices for labor, capital and natural resources are formed in the form of wages, interest income and rent.

Subjects of the resource market:

The motto of a company's behavior in conditions of market competition is the principle - produce only what you can sell, and do not try to sell what you can produce.

A key characteristic of demand for resources is its derivative nature in relation to the demand for final products. Derived demand for resources- it is the demand for resources that depends on the demand for the final products produced from those resources.

The volume of demand for a resource depends on the following factors:

Marginal product in cash, ( MRP) - an increase in monetary income resulting from the sale of products created by one additional unit of resource. This indicator is equal to the marginal product multiplied by the price of additionally produced products, i.e. MRP= MP* P. .

Under perfect competition, the demand for resources is more elastic compared to imperfect competition. Other factors also influence the elasticity of demand for resources:

Marginal cost of a resource (M.R.C.) - the increase in total production costs as a result of the use of one additional unit of resource.

Rule Execution MRP = MRC maximizes profit.

Equality of the marginal monetary product of labor, i.e. the marginal revenue received, and the marginal cost of the resource is usually called one of the rules of profit maximization. It is this equality that brings the firm to a state of maximum profitable equilibrium.

Optimal proportions of resource use

Another important problem: in what proportions should a company purchase different resources - labor, capital, land, etc. The same result can be achieved using different combinations of them. (For example, the same harvest can be obtained from a huge field, using a minimum of labor and technology there (emphasis on the land factor), and from a tiny plot, fertilizing and cultivating it in the best possible way (emphasis on the labor and capital factors)).

The measure of the efficiency of resource use will be the return on them. Quantitatively, it can be expressed as a fraction:

The company will always choose the resource for which this value is higher.

However, as a result of the law of diminishing returns, by purchasing more and more portions of the most efficient resource, the company will thereby reduce its output, and, consequently, its efficiency. This process will continue until the efficiency of using the best resource (or best resources) is equal to the efficiency of all others. That is, until equality occurs:

Since the firm optimizes the purchase of each resource in accordance with the rule MRP = MRC, and the marginal cost of purchasing a resource is equal to its price, that is MRP = MRC = P. You can rewrite the derived formula as follows:

Profit maximization is ensured by using resources in such a scale and proportions that the marginal monetary product from their use is exactly equal to the price of the corresponding resource.

Labor market

When purchasing a labor factor (hiring workers), an enterprise must compare the profitability of this factor with the costs of its purchase, or more precisely, the marginal money product of labor (MRP L) with the marginal cost of labor (MRС L). Moreover, the maximum profit is theoretically achievable in the case of complete equality of these values (in practice, at the moment of their significant convergence).

As buyers enterprises (firms) act on the labor market.

As owners factor labor and its potential sellers Almost the entire population speaks out, with the exception of disabled persons (children, old people, disabled people, etc.).

Wage - This income in cash terms me received by an employee for providing a certain labor service.

Wage - this is a price of a special kind, the value of which is closely related to the standard of living of the population. It is divided into nominal and real.

Nominal salary represents the amount of money received for performing some labor service.

Real wages expressed in the quantity of goods and services that can be purchased with a nominal salary.

Real wages are the purchasing power of wages. This purchasing power is directly dependent on nominal value salaries and vice versa - from price level(P) for consumer goods and services.

Perfect competition in the labor market assumes the presence of three main signs:

1) presentation of demand for a certain type of labor by a sufficiently large number of competing firms;

2) the absence of any one association on the part of both buyers of labor services (monopsony) and their sellers (monopoly);

3) the objective impossibility of demand agents (firms) and supply agents (workers) to establish control over the market price of labor, i.e. forcefully dictate wage levels.

In this case:

firstly, labor supply is absolutely elastic (the straight line S l is parallel to the x-axis),

secondly, the marginal labor cost (MRC) is constant and equal to the price of labor, i.e. a certain wage rate (W 0).

It is profitable for the company to increase the hiring of workers up to the number L 0, corresponding to the point of intersection of the supply and demand lines (B), when the marginal labor cost (MRC) is equal to the marginal money product (MRP). The shaded area of the figure OABL 0 constitutes the total income of the company, where one part of it (the area of the rectangle OW 0 BL 0) forms its total wage costs (the wage rate W 0 is multiplied by the number of employees L), and the other (the area of the triangle W 0 AB ) acts as net income (profit) from the use of labor resources.

Monopsony in the labor market means the presence of a single buyer of labor resources. A single employer is pitted against numerous independent wage workers.

The main signs of monopsony:

o concentration of the bulk (or even all) of those employed in a certain type of labor in one company;

o complete (or almost complete) lack of mobility of workers who do not have a real opportunity to change employers when selling their labor;

o establishment by a monopsonist (sole employer) of control over the price of labor in the interests of maximizing profits.

Monopsony in the labor market is also expressed in the fact that for a monopsonist firm, the marginal costs associated with paying for labor resources grow faster than the wage rate.

The marginal cost of labor curve (MRC L) is located above the wage rate curve at which labor is offered (S L). In this case, the labor demand curve (D L), which coincides for the firm with the monetary marginal product of labor curve (MRP L), will intersect with the marginal labor cost curve (MPC L) at point B.

Therefore, according to the rule MRC = MRP In this case, the company will hire L M people. It is not profitable for a monopsonist to hire more people. Therefore, the demand for labor on the part of the monopsonist breaks off at this level and takes the form of a broken curved line (ABL M), highlighted on the graph by thickening. And since, in accordance with the supply curve S L, such a number of workers can be hired with payment for their labor at the rate W M, then this is exactly what the monopsonist will pay them. Point M does not coincide with the point of intersection of the demand and supply schedules O. That is, equilibrium is established at a different point than under perfect competition. Compared to a firm operating in a free competitive market, a monopsonist acquires less labor ( L M< L O ), while simultaneously paying workers lower wages ( W M< W O ). In other words, the elimination of employer competition by establishing the dictates of a monopsonist firm naturally leads to a general decline in employment (and hence production) and a decline in the living standards of the population.

Unions are associations of hired workers created to protect their economic interests and improve working conditions. According to the composition of the united workers, they can have a narrow professional, sectoral, regional, national and even international character. Their task is to protect employees from possible exploitation by enterprises that demand labor and pay it at a low price.

Therefore, trade unions organize collective forms of labor sales instead of individual ones. They are trying to ensure an increase in wages, an increase in the number of employees, improved working conditions for workers and social guarantees for the unemployed.

There are three main models of labor market functioning with the participation of trade unions.

Model for stimulating labor demand

The first model is focused on increasing wages and employment by increasing the demand for labor.

Labor Supply Reduction Model

The second model is focused on increasing wages by reducing labor supply.

Model of direct impact on wages

The most common model is focused on increasing wages, achieved under direct pressure from the union. As a rule, it is implemented by powerful, open (that is, accessible to everyone who wants to join them) industry or national trade unions, which, for example, under the threat of a mass strike, are able to force enterprises to agree to the increase in wage rates desired by the union.

The increase in wages occurs due to a reduction in employment. From this we can conclude that the results of the struggle of trade unions for increasing wages are contradictory, since this increase itself is associated with a decrease in the number of workers. In other words, unbridled wage growth can generate unemployment.

Capital Market

Capital - means of production created by human labor, intended for industrial consumption.

As a special factor of production, capital combines any productive resources - machines, equipment, tools, the latest technologies and developments, software products created by people in order to use them to produce future economic benefits for the sake of making a profit.

1. Capital is called resources, created by people. This is its difference from the earth factor, which combines various resources created by nature.

2. Capital is only items used for production activities. Shoes, food, personal cars and other consumer goods, although created by people, are not used in production and are not capital.

3. The purpose of production in which capital is used is profit.

Distinctive feature capital is its ability to reproduce itself on an expanding scale.

In the mechanism of initial accumulation of capital there are redistributive And savings components.

Initial accumulation is usually carried out due to a sharp wealth redistribution in society. A relatively small part of the population, which managed to adapt in time to the conditions of a capitalist economy, quickly becomes rich, while the bulk of it, trying to preserve traditional forms of economic behavior, becomes poorer.

Savings mechanism Primary accumulation is associated with a reorientation of the structure of use of personal income from consumption to savings.

Enterprise capital is called the valuation of all property owned by him. Thus, the value of the company’s capital, in addition to the cost of machinery, equipment, structures, etc., that is, the capital factor itself, includes:

 the cost of other factors of production owned by the enterprise;

 the amount of cash and other financial assets available to him that can be spent on acquiring any of the factors of production;

Various elements of an enterprise’s capital behave differently in the production process:

One component of capital is used once and is completely consumed during each cycle of production. The other part functions for several years, even decades, and is gradually consumed over several production cycles. Accordingly, the first part of capital is called negotiable, and the second - main capital.

The organization of new production is impossible without investment in structures, buildings, and equipment. Further operation of the enterprise also requires costs associated with the renewal and restoration of existing fixed capital. Fixed capital is a production factor durable. In this regard, of particular importance in the functioning of the fixed capital market time factor.

The activities of any manufacturer involve the need to implement capital investment or investment - spending money at the moment in the hope of receiving a certain income in the future.

From an economic point of view, identical amounts that have different time localizations differ in size. The method developed by economists makes it possible to compare amounts of money received at different times. discounting method . Discounting makes it possible to compare cash flows received at different times by casts(recount) them to one time period.

Size PV is called the current discounted value of future income, since the discount factor allows the future and present values to be equalized. And since the numerical value of the discount factor is always less than one, equalization occurs by reducing the future total income by an amount inversely proportional to the interest rate.

Economic theory connects investment activity primarily with the level of interest in the country

The figure illustrates the inverse relationship between a firm's investment demand (D 1) and the interest rate. At a higher interest rate i 1, the amount of investment will be equal to I 1. A decrease in interest to a value of i 2, other things being equal, causes an increase in investments made to the level of I 2.

Regardless of what funds the company uses when investing - its own or borrowed funds - the market interest rate acts for it as the costs that it will have to bear when implementing the investment project.

Offer of borrowed funds, necessary for the purchase of capital resources, is formed by both firms and households.

The decisive factor for making a decision in favor of household savings is percentage value .

The interaction of supply and demand in the investment funds market determines the equilibrium values of investment volumes and prices

The intersection of the aggregate demand (AD) and aggregate supply (AS) curves for investment funds at point O gives the level of the market interest rate i 0, developing Not within an individual industry, as in most markets, and within the entire national economy as a whole.

The large number of buyers and sellers in investment capital markets creates conditions close to perfect competition.

Factors influencing investment demand and supply of investment resources

In the capital market the market for capital resources and the credit and financial markets are intertwined, from which funds are taken to purchase them.

Land market

In economic theory it is customary to distinguish wide And narrow interpretation factor earth

In a narrow sense, the earth is understood as land itself. In the broad sense of the word, land means all natural resources used in the production process.

Natural resources - is a set of natural conditions that can be used in the process of creating goods, services and spiritual values

Natural resources are divided into real, that is divorced and used, And potential, that is projected, but exactly not installed. Real natural resources directly affect the amount of national wealth, the standard of living of the population, and the efficiency of the country's economy, while potential resources are not included in the national wealth and only create promising opportunities for successful production in the future.

By classifying natural resources according to another criterion, they can be divided into renewable and non-renewable.

Renewable natural resources - these are resources that, as they are spent, are reproduced under the influence of natural processes or conscious human efforts.

Non-renewable natural resources These are resources that cannot be restored once they are completely exhausted. This primarily includes all minerals.

Non-renewable resources have high social significance and value, and their owners, by regulating the intensity of the supply of resources to the market, are therefore able to seriously influence the process of general economic development. The dynamics of the value of non-renewable resources over time is a multifactor process and is only partially predictable. Wherein specificity this type of natural resource is that, unlike almost all other resources, their owner is equally Both use and non-use can be effective these resources over a period of time.

Market price non-renewable natural resources has long-term tendency to increase in proportion to the annual rate of return on capital.

The most important of renewable resources is fertility of the earth .

The land factor, like the capital factor (and unlike the labor factor), is not inseparable from its owner. The use of land as a factor of production defines the category ground rent as peculiar fees for this resource(for the tenant) and at the same time special type of income(for landowner)

Land rent comes in two main forms:

o differential rent and

o pure rent.

Land areas vary greatly in quality . Some of them are located in climatic zones favorable for agricultural development, while other lands are in much worse natural conditions.

The lands differ in location . Some are located near large cities and transport arteries, which brings them closer to consumers of agricultural products and suppliers of fertilizer and other industrial goods.

Simultaneously land fund is limited, that is, there is a strictly defined quantity of both land in general and land plots of a certain quality.

Farms operating on the best and average lands are in an advantageous position compared to farms on the worst plots, since their costs are lower. This gives them the opportunity to receive additional income, called differential rent I . The most typical reasons for the formation of differential rent I are the advantages that a land plot has in terms of fertility or location

The economic profit obtained on all plots exceeding the marginal ones in terms of land quality is called differential rent .

In addition to the natural fertility of the earth, there is the concept economic fertility. The economic fertility of the land is associated with successive additional investments of capital into it and reflects the intensive path of development of agricultural production. The intensity of production on farms varies. Successive additional investments of funds are implemented with varying efficiency. Farms that effectively use capital investments and conduct intensive production receive additional income called differential rent II.

The fundamental mechanism for the formation of differential rent II does not differ from the mechanism for the formation of differential rent I. Only the reasons for the reduced level of costs differ. If for differential rent I they are associated exclusively with natural factors, then for differential rent II they are associated with a combination of natural factors and capital investments. An entrepreneur invests in improving the properties of the land, and it reacts to these efforts with more or less responsiveness.

Net rent – absolute rent – is a consequence of the absolutely inelastic supply of land in the conditions of the existence of private ownership of it.

On the one hand, private ownership of land excludes the free migration of capital into the agricultural sector of the economy (land cannot be used without the permission of the owner). On the other hand, the amount of land suitable for agricultural use is strictly limited, that is, there is no place to get additional plots from, bypassing the interests of the landowner

Landowners have the opportunity to request rent for any land plots, and tenants have the opportunity to set inflated (compared to the practice of forming costs and profits in other sectors of the economy) prices for agricultural products in order to be able to pay them.

In other words, net rent is a kind of tax that landowners, through tenants, impose on the entire society, taking advantage of the fact that land as a factor of production is extremely immobile.

Selling price of land is directly related to the rent it brings, since, by alienating the land, its owner wants to receive the total discounted value of all future rent payments.

The price of land is determined by two factors: 1) the price of land is directly proportional to the rent it brings; 2) the price of land is inversely proportional to the loan interest rate.

Assignments on topic 6.

Tests

1. The company minimizes its costs when:

a) The marginal products of all factors of production are the same

b) The ratio of the marginal products of all factors of production to their prices is equal to one

c) The marginal products of all factors of production tend to zero

d) Marginal products exceed the marginal cost of acquiring them.

e) None of the options given are completely accurate

2. Changes in real wages are determined by comparing nominal wage growth with:

a) Changes in prices for goods and services

b) Tax changes

c) Changes in bank interest rates

d) Changes in taxes and other mandatory fees by the amount of taxes and other mandatory fees, and then compared with changes in prices for goods and services

e) Nominal wages should be reduced

3. Calculation of the current discounted value (PV) is a procedure that allows:

a) Establish the present value of future income

b) Eliminate the impact of inflation on estimates of future income

c) Find out how much interest you can get from the bank for the period under review

d) Select the best among alternative investment projects

e) All of the above are true

4. The level of investment demand is related to the interest rate:

a) Inverse relationship

b) Does not depend on her

c) Direct positive dependence

d) Inverse quadratic dependence

e) All the suggested options are wrong

5. An increase in the interest rate, other things being equal, will lead to:

a) Increased investment

b) Reducing the supply of loanable funds

c) Reducing investment

d) Increased demand for borrowed funds

e) Does not affect the volume of investment

6. Land supply:

a) Inelastic

b) Elastic

c) Absolutely inelastic

d) Absolutely elastic

e) Depending on the specific situation, may correspond to any of these options

9. The price of land depends on:

a) Current discounted rental value

b) Fertility of the site

c) Location of this site

d) All given options are correct

e) All the given options are incorrect

TASKS

The price of one cake is 1.5 dollars. One baker's earnings are 50 cents per cake. Food consumption - 40 cents per cake. The cost of organizing one workplace is $35 per day. The performance is given in the table:

Find: TS, MR, AR, MRC, MRP, build graphs. How many workers will the firm hire?

How many workers will the firm hire for each of the following changes:

a) Products have risen in price by 40%;

b) Salaries increased by 50%;

c) The price for one cake will increase to $2.

Given:

Find MR, AR, MRC? MRP and product price with the optimal number of employees - 5 people.

Demand for resources under perfect competition

Competition is the struggle of entrepreneurs for the most favorable conditions for the production and sale of goods in order to obtain maximum profits. A perfectly competitive market is characterized by:

A significant number of sellers and buyers in the market for a particular product;

The production volumes and supply of an individual manufacturer constitute such a small share of the total supply that the seller cannot influence the price;

All sellers offer homogeneous, standard products;

All market participants have the same information about the state of affairs on the market;

Free entry to the market and free exit from it. In a perfectly competitive market, sellers cannot influence the market situation and therefore must adapt to it. The inability to influence the price forces sellers to better take into account the needs of society, improve the quality of products, and reduce production costs in order to maintain their position in the market. In modern conditions, perfect competition is the exception rather than the rule. Today, the markets closest to perfect competition are agricultural products, securities, and currency. Most of the markets are monopolized.

Demand for resources under conditions of imperfect competition

A market that lacks at least one sign of perfect competition is called an imperfectly competitive market. There are three main models:

Pure monopoly; - oligopoly; - monopolistic competition.

A pure monopoly is a market in which there is one seller. Entry into the industry is blocked for other firms; obstacles to entry into such an industry for other firms may be: - low production costs of a large firm; - availability of state patents and licenses for products; - availability of exclusive rights to the most important sources of raw materials; - granting the government the status of the only seller. An oligopoly is a market characterized by a small number of participating firms, confronted by many small buyers, each of which feels interdependent in setting production volumes and prices. Firms can act completely independently of each other or, on the contrary, enter into an agreement regarding production volumes or price levels, pursue independent pricing policies or follow the leading firm in setting prices.

Monopolistic competition involves many sellers of similar but differentiated products who can set their own prices. Entry to such a market is relatively free. Externally, monopolistic competition is similar to perfect competition, but the presence of limited but monopoly power and the ability to influence prices reduces the efficiency of using society's resources. Production is carried out at higher costs than in conditions of perfect competition. But having a variety of brands, types, styles of quality products allows you to better satisfy the needs of customers.

Factors influencing changes in the demand for resources and the quantity of resources demanded

In the resource market, demand is provided by firms, and supply is generated by households. The demand for a resource by an individual firm depends on:

Demand for the product in the manufacture of which this resource is used;

The marginal productivity of the resource;

Prices of goods produced using this resource. A firm seeking to maximize profit makes a demand for a resource, guided by the rule of resource use, according to which, in order to maximize profit, the firm must use such an amount of a resource at which the marginal product of the resource in monetary terms is equal to the marginal cost of using this resource. The marginal return on a resource characterizes the increase in total income resulting from the use of each additional unit of input resource. The marginal cost of using a resource characterizes the increase in production costs due to the acquisition of an additional unit of the resource and is equal to the price of the resource. Changes in demand for a resource occur due to changes in: - productivity of the resource - the more productive the resource, the greater the demand for it. - demand for a product - the greater the demand for a product, the greater the demand for the resource used in the production of this product. - prices of other resources.

A change in the price of one resource leads to the emergence of: - a substitution effect (if metal prices have increased, then the demand for plastic will increase.

Output effect (increased...........

A decrease in the price of one resource will entail an increase in production costs, a decrease in output and a decrease in demand). The firm will achieve the lowest production costs of a certain volume of output if the demand for resources follows the rule: the ratios of the marginal products of the resources used to the prices of these resources are equal to each other.

Elasticity of demand for resources

The degree to which demand and supply change under the influence of factors affecting supply and demand is called the elasticity of supply and demand. There are: price, cross and income elasticity of demand.

1) Price - characterizes the degree of change in demand under the influence of price changes and is measured by the elasticity coefficient:

The degree of elasticity depends on: - the number of substitutes for a given product; - the share of this product in the consumer’s income; - nature of the goods; - time factor. Types of price elasticity of demand: - type of elasticity; - completely inelastic demand; - inelastic demand; - unit elasticity of demand; - elastic demand; - perfectly elastic demand. Depending on the nature of the elasticity of the product, sales revenue may rise, fall, or remain unchanged when the price of the product changes.

2) cross - characterizes the degree of change in demand for a product when the price of the product changes: The value of the cross elasticity coefficient depends on the nature of the relationship between the goods.

3) Income elasticity characterizes the degree of change in demand for a product under the influence of changes in income: because Since the relationship between price and quantity of products supplied is always direct, the elasticity of supply is always greater than 0.

Profit maximization

Profit maximization for a company means searching for ways to obtain the greatest economic profit, that is, the difference between total income and total costs.

P m = TR - TC

Pm- total or net economic profit;

TR- total income , defined as the product of the quantity of products sold and its price;

TC- total costs, including both direct and indirect.

If production and sales increase, then, with a constant price, total income and total costs will increase: income - due to an increase in the quantity sold, costs - due to the law of diminishing returns. Profit will occur as long as the growth in income exceeds the growth in costs, and its size will depend on the ratio of these values. Therefore, to solve the problem of profit maximization, it is important to take into account not the general, but the maximum values of the indicators under consideration.

The firm will increase output until the additional cost of producing an additional unit of output equals the marginal revenue from its sale. This is called a rule MC = MR.

Difference between M.C. And M.R. will represent the marginal profit ( P.M.), that is, the profit received by the firm from the sale of each additional unit of output. If MR > MC, index P.M. will take positive values, indicating that each additional unit of output adds a certain dose to the total profit. When M.R. And M.C. become equal, this will mean that PM = 0, and the total profit at this point will reach its maximum. Further increase in output will lead to exceeding M.C. above M.R. And P.M. takes negative values. In this case, when marginal profit becomes negative, the firm can increase its total profit by reducing its level of output.

Land rent. Land price

Land is a resource that is not produced, but exists as a natural object. As a factor of production, land: - is non-reproducible and therefore quantitatively limited; - different quality (in terms of fertility, richness of deposits); - immovable; - characterized by a long period of use. As a result of the interaction of demand for land and supply of land in the land market, the price of land services is formed - land rent. The purchase and sale of land services is carried out by leasing land. Land rent is the income of the land owner. Since the supply of land is completely inelastic, demand is the only factor determining rent. There are two types: differential rent 1 and differential rent 2. The first is associated with natural differences in the quality of land. It, in turn, is divided into fertility rent, received from more fertile lands, and location rent, received from lands located closer to other factors of production and consumers. The second is related to business efficiency. In practice, ground rent is collected on the basis of a lease agreement as part of the rent, which, in addition to ground rent, may include depreciation of structures and structures.

The price of land represents capitalized (converted into capital) land rent. , Where

R - annual rent;

I - bank interest.

In practice, along with the amount of rent and the level of bank interest, the price of land is influenced by many other factors: - demand for non-agricultural land; - inflation; - scientific and technical progress.

In the 20th century, in market economies there was a steady upward trend in land prices.

System of National Accounts

The system of national accounts is a system of statistical data on the production, distribution and use of the final product, compiled according to a uniform methodology for all countries. The SNA includes a system of accounts that reflect the participation of the entire national economy and individual entities in the processes:

Production of material goods and services;

Education income; - redistribution of income; - use of income; - changes in national wealth; - lending and financing. The entities maintaining national accounts are:

Non-financial enterprises; households; public and private administration; agents outside the country. They all keep accounts:

Production account, which reflects the costs and results of production;

National Income Education Account - which reflects the balance between value added and national income;

The distribution account is the balance between national income and factor incomes of production participants;

The redistribution account is the balance between national income, social benefits, taxes and disposable income;

National Income Use Account - reflects the distribution of disposable income between consumption and savings;

Property change account - using savings to increase property;

The lending account is the balance between savings balances not invested in property growth and changes in the volume of loans. GNP does not take into account:

Non-market transactions; - increase in free time; - improving product quality; - environmental consequences of production; - activities of the shadow economy. SNA is a system of interrelated indicators of economic development at the macro level. In other words, SNS - This is a set of tables in the form of accounting accounts, which reflect the processes of production, distribution and final use of the social product and national income.

On its basis, economic models and forecasts are developed, for example, in the field of taxation, lending, economic growth rates, state budget deficits, inflation regulation, etc. The SNA covers absolutely all technical operations taking place in the economy and all the resources that the country has.

SNA is the “accounting of the country”, since it uses the same principles: double entry, balance sheets, correspondence of accounts. The SNA is a summary table that reflects resources and areas of their use. Each resource has its own seller and buyer, so the transaction is recorded twice: once as the seller's asset, and once as the buyer's asset.

Modern SNA consists of three interconnected blocks. The first allows you to compare investments and savings, to quantify the creation, distribution and final use of national income. The second is intended to analyze the creation and distribution of product between industries, displayed in the “input-output” tables of V. Leontiev. The third block represents fund flow accounts and reflects the movement of financial assets in the form of purchases and sales in the money market.

The resource market, its subjects and features

In the resource market, demand is provided by firms, and supply is generated by households. Market demand for resources is the sum of the demands of individual firms. A firm seeking to maximize profit makes a demand for a resource, guided by the rule of resource use, according to which, in order to maximize profit, the firm must use such an amount of a resource at which the marginal product of the resource in monetary terms is equal to the marginal cost of using this resource. The marginal return on a resource characterizes the increase in total income resulting from the use of each additional unit of input resource. The marginal cost of using a resource characterizes the increase in production costs due to the acquisition of an additional unit of the resource and is equal to the price of the resource. A firm will achieve the lowest cost of producing a certain volume of output if the ratio of the marginal product of a resource to the price of that resource is the same for all resources. The firm will ensure maximum profit if it uses a ratio of resources in which the price of each resource is equal to the marginal product of this resource in monetary terms.

Developed competencies: know

substantive characteristics and features of factor markets;
definition of the concepts “demand for resources”, “supply of production factors”;
features of competition in the factor of production market;
concept, distinctive features and criteria of the labor market;
concept, distinctive features and criteria of the land market;
concept, distinctive features and criteria of the capital market; be able to
identify factors in the emergence of a company’s demand for resources;
determine the elasticity of demand for a resource;
practically apply the rule of profit maximization;
characterize the concepts of “labor”, “land”, “capital”; own
skills in identifying circumstances affecting the state of resource supply;
methods for assessing the profitability of investments;
technologies for calculating land prices.

Economic essence and features of factor markets

To meet the needs of the population, a firm must produce goods and services using a variety of factors of production. Accordingly, the state of the markets for production factors, changes in prices and the nature of the use of resources directly depend on the activities of firms in the markets for goods and services. In this regard, decisions on the production of any goods and services serve as a starting point for understanding factor markets.

The laws of productivity, competition, supply and demand are fundamental to factor markets. In the resource market, consumers and firms change places. Sellers are firms and households, and buyers are firms. Factors of production such as labor and intelligence are supplied by households and people.

A general feature of the factor market is that due to the dependence of the demand for factors of production and the demand for final goods, derived demand is ultimately observed.

Definition of the concept demand for resources can be expressed as a loss that includes the buyer's ability and desire to acquire resources for the production of economic goods.

The following factors influence a firm's demand for resources:

1) contributing to a change in the volume of acquired resources, and if considered in a graphical sense, to a change in the position of the demand curve for resources and subsequent movements;
2) affecting the resource price and elasticity of demand.

Shifts in the demand curve for a resource and changes in quantity

purchased resources depend on many factors.

1. Demand for the company's products. The greater the demand for a product, the greater the need for resources to produce it. Consumer demand for products can either improve its quality or worsen it. It turns out that the greatest demand will be for a resource that plays an important role in the production of products that are in greatest demand among consumers. Consequently, the demand for a resource of non-essential products will be low. This means that the demand for a resource does not depend on the efficiency of the resource.
2. Scientific and technical progress, namely, the technology used, which changes the marginal productivity of the exploited factor. The demand for resources increases if technology increases its productivity. Therefore, demand decreases if technology reduces productivity.
3. Differences in prices for factors of production. The firm determines technology by comparing the prices of inputs with the prices of substitute inputs. The decreasing price for a given resource, when compared with other resources, affects the growth of demand due to the firm’s adaptation to the use of a more profitable substitute resource.
4. Increase in marginal revenue. The greater the revenue, the greater the demand for the resource.
5. Increasing number of factors used together. Consequently, the demand for a factor is greater if the number of shared species increases.
The ratio of changes calculated as a percentage is called elasticity.

For example, the price elasticity of demand for the resource-labor (Ed(L)) is defined as:

where D L(%) - change in the amount of labor, %; D R(%) - change in labor supply price, %.

There are four factors that influence the elasticity of a firm's demand with respect to the price of a resource.

1. The tendency of the influence of the state of the marginal product by factor (change in prices for the factor) on a decrease or increase in the firm’s output. Assuming that the marginal revenue of a product for a resource is: marginal product (MP) times marginal revenue (MR). As a result, a slow decrease in the value MR affects a slow decrease in marginal revenue (MRP) and an increase in the elasticity of demand for a resource, while any value is observed MR.
2. Dependence of the elasticity of demand for a resource on the elasticity of demand for the final product of the company. When prices for products that have elastic demand decrease, production increases, which means an increase in demand for resources.
3. Ease of resource substitution. The degree of substitution of one factor for another affects the elasticity of demand. Consequently, the elasticity of demand for a resource is greater if the resource has a larger number of substitutes, which help to easily replace resources with each other.
4. Comparison of total costs and labor costs. The share of total production costs affects the elasticity of demand. Consequently, the lower the share of the resource, the lower the elasticity of demand for the resource.

The demand curve for factors is not the sum of the curves for some firms, unlike a perfectly competitive industry. This is due to the fact that sellers react to the state of wages. An example of this is the change in the scale of employment, which affects the state of aggregate output. And total output affects prices, despite the fact that firms determined it unchanged by making employment decisions.

The amount of resources that can be supplied to firms in an industry for uncertain purposes is called supply of factors of production industry.

Owners in a market economy choose who to supply resources to. Their choice will depend on more favorable terms of the deal. Remuneration in monetary terms is relevant in factors of production such as capital and land.

If we consider such a factor of production as labor, then in addition to the amount of wages there are other factors, for example, social status, distance to work, job stability, working conditions, growth prospects, job satisfaction, cost and demand for professional training. According to statistics, in the short term, people care only about wages, and in the long term, all components of work activity.

If the resource supply curve has a positive slope and upward direction on the graph, then this is an important characteristic of resource supply. Resource owners, given the positive relationship between supply and price, increase the supply of resources at a time when monetary value increases. An example of this is the desire of people to work in an area where wages are rising. Labor mobility is enhanced by wage differentials between regions, industries, firms and other equal conditions.

It is possible to identify the circumstances on which the state of supply of resources depends when their prices change.

1. The circumstances of the state of an economic unit - a company, an industry, an economy as a whole. Due to the fact that supply for a firm or industry in the short term can be completely elastic or highly elastic, the supply of the resource to the economy as a whole can be constant.
2. The circumstances of the period under review. Due to the fact that the degree of resource mobility increases over time, the response of resource supply to its price in the long term is higher than in the short term, especially for capital and land.
3. The fact that a resource is widespread or unique means that the use of resource supply by enterprises in several industries is more elastic than the supply of resources by enterprises in one industry.

The supply of factors of production in the short term is limited. But large firms influence the price of the resources offered by using most of them.

Currently, there are situations in factor markets that differ from situations of perfect competition.

Monopsonistic market is called a situation when the buyer in the resource market is one company; if there are 2-4 buyers, then this is a trait oligopsonistic market, and if there are a large number of buyers who individually do not influence the price of the resource, then there is monopsonistic competition.

There are various combinations, but the following models are considered key types of imperfectly competitive markets. And regardless of the types of markets, firms use similar resource solutions in their activities.

In conditions of imperfect competition, as well as in conditions of perfect competition, the profit maximization criterion remains unchanged: the marginal product in monetary terms is equal to marginal costs.

The direct dependence of price on the amount of resources offered is an important feature of imperfect competition in the factor market (the more resources, the more the firm pays, and vice versa).

Table 7.1. Marginal costs of factors for a firm operating in conditions of imperfect competition in the factor market, den. units

Variable resource units	Variable resource supply price P x = ARC X	Total cost of a variable resourceTS X	Marginal cost of a resourceMRC X

When considering the table. 7.1 we can conclude that the firm pays a higher price when purchasing additional quantities of variable factors. Consequently, factor supply prices and average resource costs ARC X will be lower than the limit values (Fig. 7.1).

As long as the use of a resource increases revenue rather than costs faster, the firm will increase its quantity. The firm's profit is maximum at the size of the resource X g units at which marginal revenue MRP Xl equal to marginal cost MRC X.

Rice. 7.1.

Here X g is the profit-maximizing amount of resource. With a further increase in the amount of resource, the firm's total costs will increase in contrast to revenue. Despite the fact that the marginal revenue from products by resource is X 1 = MRP Xi, this is not the price of payment X^ resource units. The required price is represented by the resource supply curve (S x). When analyzing it, it is clear that in order to purchase X g units of resource X by a company, the company must pay R j dollars, and this will be the equilibrium price of the resource for the firm.

For optimal development of an enterprise, the main thing remains to determine the combination of factors that maximize profit in the long term with variable resources.

To minimize total costs for a given output, the firm must use a combination of resources such that the last dollar spent on any resource produces the same amount of output (least cost rule). This means that the use of different types of resources (X a, X b, X s, X n) should give the combination:

But still, the above equality is characteristic of perfect competition. Since under conditions of imperfect competition the firm must take into account not the supply price (P x), and the marginal cost of the resource (MR).

Another rule that a company must adhere to is profit maximization rule in which the firm selects a combination of inputs such that marginal revenue equals the price for each and all inputs. This rule is a general rule for maximizing profits using multiple resources in competitive markets. Let us consider the above rule in algebraic form:

When making resource decisions, a firm should pay attention not to the supply price (P x), but to marginal costs ( M.R.C. X), since the prices for factors change depending on the amount of acquired resources, and when a certain factor is replaced by another, the price and marginal product change and the firm must increase the use of the resource to an indicator where MR = MS.

A firm, presenting a demand for factors of production, strives for an optimal combination of factors of production to minimize costs for each given volume of production and to determine the volume of production that maximizes its profit.

At the same time, it compares the values of marginal revenue and marginal costs.

The cost indicator of the productivity of a factor used by a firm is its marginal product of the factor in monetary terms or the marginal revenue from the product of the factor used.

The marginal product of a factor in monetary terms (MRP - marginal revenue product) is the increase in the total income of a company as a result of using an additional unit of a variable factor with the quantity of other factors remaining constant.

This indicator is calculated as the product of the marginal physical product (MP) and the marginal revenue received from the sale of one additional unit of output (MR):

Thus, in conditions of perfect competition, when firms are “price takers” (MR = P), the marginal product of a factor in monetary terms is the product of its marginal product in physical terms and the price of a unit of output:

where P is the price of a unit of output.

Under conditions of imperfect competition, the marginal revenue from the sale of an additional unit of output will be less than its price (MR In order for a firm to determine how much of a resource it should purchase, it is necessary to know the price of this resource, and also to compare how much the firm's income and costs from using it will increase one additional unit of a resource. The firm's cost of acquiring each additional unit of a factor is called the marginal cost of the resource or marginal factor cost.

Marginal resource cost (MRC) is the firm's cost of acquiring each additional unit of resource.

If a firm acquires resources in perfectly competitive markets, then the marginal cost of acquiring them will be equal to their prices. Consequently, it is possible to formulate a general rule for maximizing profit for a firm that has a demand for one variable factor.

The profit maximization rule for a firm that demands one variable factor: the firm must use such an amount of a variable factor that its marginal product in monetary terms will be equal to its marginal cost: MRP = MRC.

Following this rule, the firm will demand a factor of production until the marginal cost of using an additional unit of the resource does not exceed the marginal revenue received from using this additional unit of the resource. The firm's equilibrium will occur at the point where MRP = MRC (Fig. 10.2).

Rice. 10.2. Equilibrium of a firm in the factor market

^ Illustrative task

In a shoe manufacturing company, the marginal product of labor is 3 dozen pairs of shoes per day. Is it advisable to hire an additional employee if the daily salary is set at 10 MU, the price of a dozen pairs of shoes is 5 MU?

The firm's equilibrium condition is: MRP = MRC, MRP l = MP l · Р = = 3 · 5 = 15 MU, and MC = w = 10 MU.

Therefore, hiring an additional employee is advisable, since MRP l > MC.

If the firm acquires each resource according to the principle of profit maximization, then the ratio of the marginal productivity of each variable factor in monetary form to its price (as a ratio of equal values) will always be equal to one.

I Rule of profit maximization for a firm that demands several variable factors: profit maximization is achieved when the marginal product of each variable factor in monetary terms is equal to its price.

where MRP l is the marginal product of the labor factor;

P l = w - price of the labor factor, equal to the wage rate; MRP k - marginal product of capital;

P k = r is the price of capital equal to the interest rate.

In this case, the profit maximization rule looks like this:

Compliance with this condition means that the company operates efficiently, i.e. an optimal combination of factors is ensured, minimizing production costs, with the only possible output volume maximizing profit.

Illustrative problem

At a meeting of the company's management, a question arose about the redistribution of costs. What decision will the director make about the ratio?

wearing factors of production based on the data presented below?

Existing Marginal Product Price

Factor is the volume of the factor in the money factor,

use of the expression, DE DE