ENTERPRISE AS

PRODUCTION SYSTEM
1. Essence, terms and types of
entrepreneurial activity.
2.Legal forms of enterprise
3.Mikroekonomicheskie indexes of
production
4.Factors of production
5.Production function
6.Theory of the productivity of factors
7.Demand on the factors of production.
Rule of the use of resources
8.Rule of minimization of costs, and the
terms of maximization arrived
 Essence, terms and types of
entrepreneurial activity
 An ENTERPRISE is initiative, independent activity
of citizens, their associations, carried out on the
fear and risk, under the property responsibility,
directed on innovations and receipt of income.
 BUSINESS is any type of activity, based on a
risk and directed on the receipt of income.
 A main difference of enterprise from business is
innovative character of the first, activity, main
sense of which is «creative destruction»,
continuous process of advancement, introductions
of innovations.
 A production enterprise is the most meaningful kind,
because financial and spiritual values and blessings
are created in him. Building, transport, domestic
services, information – all of it and other great deal
engulfs this type of entrepreneurial activity.
 A commercial enterprise is trade, sale of commodities
and services which are carried out in accordance with
the known formula of commodity appeal of T- D-Т.
The source of income for a merchant is a difference
between the costs of purchase and sale.
 A financial enterprise engulfs money-and-credit
relations. One subjects attract free money facilities of
population and legal entities, other use them in form
credits in the field of production and commercial
activity as investments. Source of income here is a
difference between a percent which levies from a
borrower, and percent which is paid to the depositor.
 An insurance enterprise supposes to the
guarantee to insure for a certain pay,
indemnification of possible detriment of
property, values, life.
 Intermediary activity is component part of
other directions to entrepreneurial activity.
Quite often a mediator takes producers and
users, salespeople and buyers only, instrumental
in performing of mutually beneficial transaction,
getting commissions for it.
 Legal forms of enterprise
 The legislative acts of country are regulate
creations and функционирова-
 Niya of organizational forms of enterprises and
firms. In different countries организационно-
правовые forms not identical, but most typical
it is been:
 Individual economies.
 Partnerships (associations)
 Corporations.
 Macroeconomic indexes of
production
 For enterprises important description of their production activity a
production of concrete type of economic product volume serves as,
foremost, in natural expression (in physical units) during a certain period
(year, quarter, month, week, days). The proper indexes name an annual,
quarterly, monthly, a week's, day's issue.
 The index of gross profit of enterprise, being a total cost of eventual
products, produced by an enterprise for certain period, is more universal,
shown in the real market prices. We will mark that, using a concept «Gross
receipt» in the indicated sense, we consider his identical to the concept
«Gross product», supposing that the product created for the receipt of
profit will be realized at market price and brings a profit in a money form.
 A few by volume production performance of enterprise indicators were
used in soviet economic practice. A general production volume monetary,
including a production uncompleted, got the name of gross products.
Completed in a production and shipped to the user products were named a
commodity, and the prepaid products – realized.
 The volume of sales to the products produced by an
enterprise it is accepted also to name a profit yield. A gross
receipt (realized products, profit yield) is expected by the
increase of volume of products in the physical measuring on
the middle cost of physical unit. If an enterprise produces a
few types of products, then a gross receipt is determined by
adding up of cost of all producible and sold products.
 In the number of production performance of enterprise
indicators a dominant place is occupied by the costs of
production. To the costs productions take expenses, charges
on the applied factors of production, in-use production
resources. It is a cost of natural resources, capital goods,
labour resources, informative resources, used in the process
of production of goods. Sometimes along with actually
production expenses to the costs take expenses, related to the
sale to the production products. In this case it is necessary to
talk about the total costs of production and appeal.
 At determination of costs of enterprise it is
expedient to divide them into permanent and
variable.
 To permanent take costs, not depending or not
substantially depending on a volume productions.
It the charges of resources, taking place constantly
regardless of, how many products produce in this
period firm. So, expenses on maintenance of
apartments, on payment of regular managerial and
attendant staff, depreciation decrees, compensating
the wear of equipment, interest payment on the
attracted credits usually unconnected direct
appearance with the amount of producible products
and behave to the committed costs.
 kinds depending on nature and destiny of charges.
 Financial expenses include foremost the charges of producer on
raw material, materials, energy, ready-to-cook foods,
комплектующие and other purchased wares. Often to material
take et al, so-called equated with them to the expenses.
 A salary is expenses on payment of labour of basic and auxiliary
personnel, including all extra charges on a salary and deductions
related to it in various funds (insurance, pension and other).
 Depreciation of the fixed assets is obligatory, plugged in a prime
price deductions on реновацию (renewal) of wear of capital assets,
indemnification of their physical and moral senescence.
 Additional (invoices) charges, being expenses, unconnected
directly with a process productions, but necessary for his
maintenance. It is charges on teaching, business trips, payment of
services of strange organizations and other great deal.
 Gross revenue is a major economic performance of enterprises
indicator. An income is an additional profit, unconnected direct
appearance with paying for the use of certain production factor,
say, labour, capital, natural resources.
 Difference between the cost of offtake and his
prime price and there is gross revenue.
 Factors of production
 In the simplest presentation the aggregate of production factors is taken to the
triad «earth», «labour», «capital», incarnating participation of natural and
labour resources, capital in creation of product of economic activity goods. As
a fourth factor the row of authors name a «enterprise».
 A natural factor reflects influence of environmental conditions on production
processes, use in the production of natural sources of raw material and energy,
minerals, landed and water resources, air pool, natural flora and fauna.
Natural surroundings, Earth is simultaneous production ground on which and
capital goods are placed in which, workers work.
 A labour factor is presented in the process of production labour of busy in him
workers. All participants, straight or indirectly involved in a production, bring
in the labour in him, and motion of production, and his end-point, depends
from this general labour.
 A factor a «capital» presents involved in a production and directly
participating in him capital goods. A physical capital is presented as the fixed
assets (fixed assets of production), but it is legitimate to tack to him and
floating capital (circulating assets).
 Enterprise however much a factor possesses the generally accepted
quantitative measuring devices unlike labour and capital, judge about affecting
of this factor volume and other results of production is rather in a high-quality
plan, I.e. by an expert way.
 Production function
 A production function determines the maximal volume
of output of products at every set amount of resources.
This function describes dependence between the expenses
of resources and issue of products, allowing to define the
maximally possible volume of output of products at every
set amount of resources for providing of the set volume of
output of products. A production function summarizes
only technologically effective receptions of combining of
resources for providing of maximal issue of products. Any
improvement is in technology of production, cooperant to
growth of the labour productivity, обуславливает new
production function.
 Intercommunication between the change of
scale of production and in the volume of
output of products named the proper change
by a return from a scale.
 Permanent return from a scale. If at the proportional
increase of amount of factors in n of one times a production
volume also will grow in n of one times, then a permanent
return takes place from a scale, I.e. Q2 = nQ, (where Q is a
primary production volume). For example, a firm will run
into the situation of permanent return from a scale, if at the
proportional doubling of amount of all resources a
production volume also will be doubled.
 Increasing return from a scale. In the case when the
proportional increase of amount of all applied factors in n
of one times will cause growth of production volume more
than in n of one times, there is an increasing return from a
scale, I.e. Q  nQ.
 Declining return from a
scale.
 When the proportional increase of all applied factors in n of one
times causes growth of production volume less than, than in n of one
times, a decreasing return takes place from a scale, I.e. Q2  nQ.
 We will go back to information of table 10.1 and will consider a
situation, when a firm makes decision about a proportional increase
on 50% factors, in-use in the following combination: 2 ед. labour and
6 ед. capital. At such change of scale of production a firm will apply 3
ед. labour and 9 ед. capital. Proper to this combination of factors the
volume of the produced products will make 86 television sets.
Evidently, that growth of production volume as compared to a
primary volume (71 television set) is only 21%, while growth of
amount of the applied factors –50%. In this case a firm runs into the
situation of decreasing return from a scale. Reasons of declining
return from a scale more frequent than all are growings bureaucratic,
or hierarchical, costs of internal management of overgrowing firm.
 Theory of the productivity of
factors
 general, maximum and middle product.
 A general product (TR) is a total volume of output of
products, got within the framework of the set production
function, and measured in physical units.
 The maximum product of factor of production (MRL),
calculated in physical units, shows a change in the volume
of output of products, caused by using of additional unit
of this factor (L) for an unchanging amount all other.
 The middle product of factor (ARL) is determined by
dividing of volume of the produced products by the
amount of in-use variable factor of L:
 ARL = Q / L
Demand on the factors of production. Rule
of the use of resources

 DEMAND ON FACTORS of PRODUCTION

(DF) is DETERMINED by DEMAND FOR
GOODS And SERVICES, PRODUCED By
THESE FACTORS.
Rule of minimization of costs, and
the terms of maximization arrived.
 optimum combination of factors, in-use in the
process of production, is arrived at then,
when the last expended rouble on the
purchase of every factor gives the identical
increase of general issue of products.