Located in the economy direct return on investment in it investments in assets related to the production, bears the name of the production possibilities.
main obstacle limiting the production capacity, is such a factor as usual shortage of resources required.Their consumption in the production of a product means that the creation of other products of these resources will be missed.This situation makes the directors to choose what products to produce in the first place.
To assess the production capacity of the economy, analysts usually use special plan, called the production possibilities curve.It shows all scenarios the use of resources for the production of any articles and products.
When analyzing this curve economists can visually assess the production capacity available to the company at this stage, and make the necessary conclusions for further work.
Act substitution works just a production possibility curve.It is this: with the full use of a resource for the production of the same technology, as well as increasing the volume of the production automatically reduces the number of units of another kind, which is necessary for the release of the same resource.
absolutely any production can be effective if production capacities are distributed correctly.For example, do not make obvious distortions, resulting in some goods flood the market, while others will be exclusive, although the initial cost of the first and the second will be about equal.
should also take into account the factor that the prices for any kind of product now produced in large quantities, will grow still, as always with the opportunity cost of time effect.The growth of such costs is thus wake-up call, after which the company is recommended to either improve the process or stop the release of this product, as it will not pay for itself.If this is incomplete use of resources, just need to change the process.If you use all the technological possibilities, it is imperative to refuse the release of this product.
What's interesting - the analysts found that the production capacity of today is not only the companies but also for society.
Production capacities of society - is the set of all production possibilities separate territory.Proper use of company resources will in future not only save a certain number of them, but also to improve existing processes, thereby reducing the opportunity cost.
Thus, in analyzing the state of production is required first to familiarize with indicators of manufacturing capabilities and to establish whether it is possible to increase the production or the need to improve it first.
