At almost all stages of human development, society faces the main question: “How and in what quantities, with limited resources, to maximize productivity?” To solve this problem, economic systems and their types have been invented. Each of these systems solves this issue in its own way. They have pros and cons. Let's consider in more detail. Grade economic system - important nuance in the politics of the state.

The concept of an economic system

The economic system is a structure that unites all economic processes, production relations, which exist in society. This concept should be understood as an algorithm, as well as a way of production, which, on the one hand, determines the relationship with consumers, and on the other hand, establishes links between producers.

It should be noted that the concept of "economic system" and its types strongly depend on what scientific school is being discussed. In some, it is considered with the help of macroeconomic concepts, in others - due to human influence, in others, attention is focused on what are the mechanisms of the economic system: systemic, and so on.

In any economic system there will be basic processes of production, distribution, exchange and consumption. In any of the available systems there is a production process that is created with the help of special resources. However, some elements in this matter are different. We are talking about what mechanisms of production are used, the motivation of the producer himself, and also how difficult the nature of socio-economic relationships is.

Economic system and its types

The most important thing in the analysis of the described term should be called typology. The characteristic of each type of systems has 5 main parameters by which they are compared with each other. Below, the types of economic systems and their characteristics are described in detail, but for now let's focus on more important information.

These are the mechanisms by which the system functions: social parameters, that is, about the amount of working and free time, about how labor protection and real income are carried out. The relationship between planning and market regulation is also taken into account. Also, this should include relations in the field of ownership, as well as parameters of a technical and economic type. Thanks to this data, economists were able to identify the main economic systems. We are talking about traditional, market, mixed, as well as command-planning.

Traditional type of economic system

This system of economy was the very first. She was born in ancient times. At that time, the system was based on subsistence farming. Now the traditional type is almost nowhere to be found. Sometimes it can be found in third world countries, as well as in some regions of America, Asia and Africa. In order to maintain this economic system, it is necessary to use hunting, gathering, together with low-productive farming, which is completely based on the manual method of work. Technologies are practically not used here, if you do not take into account the most primitive ones. At the same time, trade is practically not developed, if it exists at all. Features of the economic system of this type are only in its dignity.

The only advantage of this economic system is that there is no environmental pollution during operation. In addition, the burden on nature is practically not carried out.

Command-planning

This system is also called centralized. It also refers to historical types of economic systems. At the moment, it is impossible to find it in its pure form. Previously, it was found in the Soviet Union, and was also used in some countries of Europe and Asia. Other types of economic systems and their characteristics allow us to conclude that this policy is completely unprofitable.

Now scientists highlight the disadvantages of the system more than its advantages. We will review them.

Firstly, the manufacturer has no freedom, that is, how much and what to produce, only higher authorities could decide. It is impossible to meet the wide-ranging economic needs of buyers. Some items are in short supply. A black market is emerging. His appearance is a reaction to the above nuances. It is also impossible to quickly and efficiently introduce new technologies into the process in order to increase production, and so on.

It is precisely because of this that, as a rule, this system of the economy always remains behind competitors who work in a different way, entering the global market. Although there is one of the few advantages: this system makes it possible to achieve social stability for every inhabitant of the country.

Market economic system

Anyone who understands even a little about economics understands that the market is a rather complex system. It is now inherent in almost all countries in the modern world. It is also called capitalism.

The main function of the economic system is the principle of individualism, entrepreneurship, as well as competition, which arises in the presence of demand, supply and in the production of products. As a rule, the market is always dominated by only private property, and the incentive to produce any goods is to make a profit.

Even with these advantages, such a system of economics is not ideal. There are shortcomings, for example, incomes are distributed unevenly, social inequality and insecurity of some citizens are relevant. Also, the market economic system is rather unstable. It can cause a crisis. They suffer from it Natural resources(because of the barbaric attitude towards them), and practically no one finances unprofitable programs.

mixed type

Economists distinguish a fourth type - mixed, which assumes that both the state and the private sector have the same role in society. The function of the economic system is that the state supports unprofitable but important enterprises: they finance science, culture, unemployment, and many other functions, while the private segment is engaged in the production of mass goods and provides the services necessary for everyone.

Examples of economic systems and types

Be sure to consider modern countries that work with a particular economic system. Since these data are unofficial, and it is impossible to judge for sure which system of the economy they belong to with an accuracy of 100%, economic figures are still trying to determine the type of economy with which this or that state works as correctly as possible.

For example, Vanuatu, Barbados, Zimbabwe, Ethiopia and other countries that are not very developed in this regard are still working with the traditional type of economy.

The planned one is more inherent in the USSR; India also used this type until the early 1990s. In addition, Nazi Germany worked with the same economic system.

Market type in almost many countries that are currently leaders in the economy. These are the USA, Japan, France, Canada, the Republic of South Africa and so on.

Mixed type in China and Russia. More details about the types of economic systems and their characteristics above.

Russia

Let's take a closer look at Russia. At the moment, it is impossible to say exactly what type of economic type the state is working with, but professors from Moscow State University characterize the country's politics as a "mutation of late capitalism." Today adopted the economy Russian Federation taken as a transition, it should be noted that it is quite successful, as the market is developing at a tremendous speed.

transitional economy

It would be fair to consider the transitional economy as well. It combines changes within the current system and the acquisition of some characteristics from any other that exists.

At the moment, in order to form an economic system of a transitional type to a market one, it is necessary to reform the public sector, introducing privatization and leasing of property. Attention should also be paid to the creation of a market infrastructure that will satisfy the market and make production more efficient if certain resources are available.

It is also important that it is necessary to develop small and medium-sized businesses, as well as to encourage people if they decide to engage in entrepreneurship. It is necessary to work with commodity producers who have different forms of ownership: private or state. You should also pay attention to the issue of pricing. It is necessary to introduce market mechanisms.

Results

The article discusses economic types, examples and features. It is important to note that the type of economic systems is an interesting question, given that many states do not announce what mechanism they work with.

The market economic system will be the most effective, as it allows you to develop the economy from the best side, and its shortcomings are gradually reduced to a minimum. If a country begins to enter the global market with its products, then it will be able to pull the whole country out of any situation, improve the economy and put people's lives in order.

Also, don't forget about business development. It is important to encourage all entrepreneurs who are engaged in it. Through the introduction of such activities, it is possible to reduce the costs of producing widely demanded devices, but also to benefit from the functioning of this activity.

According to some reports, Russia belongs to countries with a mixed economy, according to others - with a transition. The types of economic systems described above and their characteristics should already be clear to the reader. It should be noted that, one way or another, the market in the country is really very well developed, so it is unlikely that any problems will arise in the economic sphere in the near future.

At all historical stages of human development, society faces the same question: what, for whom and in what quantities to produce, taking into account the limited resources. The economic system and types of economic systems are designed to solve this problem. And each of these systems does it in its own way, each of them has its own advantages and disadvantages.

The concept of an economic system

An economic system is a system of all economic processes and industrial relations that has developed in a particular society. This concept is understood as an algorithm, a way of organizing the production life of society, which implies the existence of stable ties between producers on the one hand and consumers on the other.

The main processes in any economic system are the following:

Production in any of the existing economic systems is carried out on the basis of appropriate resources. some elements are still different in different systems. We are talking about the nature of the mechanisms of management, the motivation of producers, etc.

Economic system and types of economic systems

An important point in the analysis of any phenomenon or concept is its typology.

The characteristic of types of economic systems, in general, is reduced to the analysis of five main parameters for comparison. This:

• technical and economic parameters;
• ratio of the share of state planning and market regulation of the system;
• relations in the sphere of property;
• social parameters (real income, amount of free time, labor protection, etc.);
• mechanisms of the system functioning.

Based on this, modern economists distinguish four main types of economic systems:

1. Traditional
2. Command planning
3. Market (capitalism)
4. Mixed

Let us consider in more detail how all these types differ from each other.

Traditional economic system

This economic system is characterized by gathering, hunting and low-productive farming based on extensive methods, manual labor and primitive technologies. Trade is poorly developed or not developed at all.

Perhaps the only advantage of such an economic system is the weak (almost zero) and minimal anthropogenic pressure on nature.

Command-planned economic system

A planned (or centralized) economy is a historical type of management. Nowadays, it is not found anywhere in its pure form. Previously characterized by Soviet Union as well as some countries in Europe and Asia.

Today, more often they talk about the shortcomings of this economic system, among which it is worth mentioning:

• lack of freedom for producers (commands "what and in what quantities" to produce were sent from above);
• dissatisfaction with a large number of economic needs of consumers;
• chronic shortage of certain goods;
• occurrence (as a natural reaction to the previous paragraph);
• the inability to quickly and efficiently implement the latest achievements of scientific and technological progress (due to which the planned economy always remains one step behind the rest of the global market competitors).

However, this economic system also had its advantages. One of them was the possibility of ensuring social stability for everyone.

Market economic system

The market is a complex and multifaceted economic system that is typical for most countries. modern world. Also known by another name: "capitalism". The fundamental principles of this system are the principle of individualism, free enterprise and healthy market competition based on the relationship between supply and demand. Private property dominates here, and the desire for profit is the main incentive for production activity.

However, such an economy is far from ideal. The market type of economic system also has its drawbacks:

• uneven distribution of income;
• social inequality and social insecurity certain categories citizens;
• instability of the system, which manifests itself in the form of periodic acute crises in the economy;
• predatory, barbaric use of natural resources;
• weak funding for education, science and other non-profit programs.

In addition, a fourth type is also distinguished - a mixed type of economic system, in which both the state and the private sector have an equal weight. In such systems, the functions of the state in the country's economy are reduced to supporting important (but unprofitable) enterprises, financing science and culture, controlling unemployment, etc.

Economic system and systems: examples of countries

It remains to consider examples for which this or that economic system is characteristic. For this, a special table is presented below. The types of economic systems are presented in it taking into account the geography of their distribution. It should be noted that this table is very subjective, since for many modern states it can be difficult to unambiguously assess which of the systems they belong to.

What type of economic system is in Russia? In particular, Professor of Moscow State University A. Buzgalin described modern economy Russia as a "mutation of late capitalism". In general, the country's economic system is considered today to be transitional, with an actively developing market.

Finally

Each economic system responds differently to the three "what, how and for whom to produce?" Modern economists distinguish four main types: traditional, command-and-plan, market, and mixed systems.

Speaking about Russia, we can say that in this state a specific type of economic system has not yet settled down. The country is in transition between a command economy and a modern market economy.

1. The main questions of the economy

Each society, faced with the problem of limited available resources with an unlimited growth of needs, makes its own choice and answers the three basic questions of the economy in its own way.

What to produce? How to prioritize the satisfaction of needs, what goods and in what quantity should be produced?

How to produce? How to make the most efficient use of available resources, what kind of resources to attract, how to organize production?

For whom to produce? How to distribute the produced goods, who will receive them and on the basis of what principles?

Depending on how society answers the main questions of the economy, certain types of economic systems are formed: traditional, market, centralized.

The economic system is a way of organizing the joint activities of people in society. The concept of an economic system includes such decision-making mechanisms as the legislative system, forms of ownership, moral standards, habits, customs adopted in a given society.

2. Types of economic systems

Under the conditions of the traditional economic system, the three basic questions of the economy (what to produce? how to produce? for whom to produce?) are resolved in accordance with established traditions. Examples of observed traditions in the economy are: customary farming methods, norms for the consumption of certain products, religious prohibitions on the production and consumption of specific goods, etc. Sales and purchase relations are poorly developed, agriculture prevails.

Most of the history of human development took place within the framework of the traditional economic system.

О Recall from the course of general history what forms of social

development corresponds to the traditional economic system.

The main incentive economic activity in a traditional system is the desire to survive. The advantages of this system are predictability and stability. Serious shortcomings include a low standard of living, lack of progress, economic growth.

The centralized system, which is also called planning, administrative, command, is characterized by the fact that state ownership is the main form of ownership. Three main issues are addressed by central government bodies. These decisions are reflected in state plans and take the form of directives (orders) that are binding on all enterprises. Centralized regulation is carried out not only in the sphere of production of goods, but also in the sphere of their distribution. Such an economic system was implemented in the Soviet Union and, to some extent, in the countries of the socialist community. The centralized solution of the main issues of the economy in the USSR made it possible to achieve success in the natural sciences, space exploration, ensure the country's defense capability, create powerful systems of social protection, etc.

However, the command-administrative economic system of the USSR was unable to ensure the development of personal initiative. One of the principles of the command economy is the principle of egalitarian distribution. If the enterprise managed to get a big profit, then almost all of it was withdrawn and transferred to the state budget.

workers received almost the same wages, encouragement for highly qualified, creative work was insignificant and had not so much a material as a moral basis. All this gave rise to the disinterest of the enterprise in improving production technology, increasing productivity, and the lack of personal interest of people in the results of their work. Gradually, the backlog of the USSR in terms of the most important socio-economic indicators from the leading powers of the world community began to increase. The suppression of the economic independence of economic entities led to a deterioration in the quality of economic growth and its slowdown. There was a need for a radical reform of the economic system.

market system. In a market system, the role of government is limited. The main subjects of market relations are economically independent participants in economic activity: citizens and firms. Their interaction takes place in the market. A market is any form of contact between sellers and buyers, on the basis of which purchase and sale transactions are made. There are many types of markets, they are classified according to the economic purpose of objects, by geographical location, by industry.

Markets are in constant interaction, forming a single complex system.

The basis of the market mechanism is individual freedom in making and implementing economic decisions. Freedom of choice in conditions market economy used by entrepreneurs, resource owners and consumers.

Enterprises have the right to acquire factors of production at their own discretion, to produce those goods and services that they consider necessary, to choose the method of their production; while decisions are made at their own expense, at their own risk.

Resource owners can use resources however they see fit. This also applies to the owners of labor resources, they can do any kind of work that they are capable of.

Consumers can buy the goods and services they want within the limits of their income. In a market economy, the consumer occupies a special position, it is he who decides what the economy should produce; if the consumer does not want to buy goods and services, firms will go bankrupt.

The main form of ownership of the factors of production is private. Private property assigns to a person the right to own, use and dispose of economic goods or resources.

Remember from the social studies course what property is.

The main issues of the economy in a competitive environment are resolved on the basis of a system of free prices under the influence of market information.

The question "what to produce?" is decided by firms taking into account consumer demand.

The question "how to produce?" is decided by firms taking into account the motive of profitability, i.e. firms choose the most effective method production.

The question "for whom to produce?" is decided in accordance with the solvency of buyers.

The main incentive for the activities of enterprises in a market system is profit. The advantages of a market economy are more effective use resources, mobility of the system, its ability to adapt to changes, the introduction of new technologies. But the market system has a number of shortcomings, the so-called "failures" of the market, which we will discuss below.

All types of economic systems can be represented in the form of a diagram.

In real life, all countries have a mixed economic system that combines the features of other systems: traditional, centralized and market. Depending on their predominance, a mixed economy of a traditional, centralized or market type is distinguished.

3. Mixed economic system

In a market economy, problems arise that the market system is not able to solve. Such cases of market failure are: inflation, unemployment, the emergence of monopolies, the cyclical nature of economic development, the uneven distribution of citizens' incomes.

In a market system, there is also a need for the production of public goods. Public goods are economic goods, the use of which by some members of society does not exclude the possibility of their simultaneous use by other members of society. These include, for example, national defense, fire protection, elimination of the consequences of emergency events (earthquakes, floods), state television and radio broadcasting, etc. Public goods differ from private goods that have a private seller and a private buyer, such properties as non-excludability and non-profitability. Non-competitiveness means that goods and services can be

used by many people at the same time; at the same time, the amount of goods available to the rest does not decrease (for example: lighthouse, fireworks). Non-excludability is the impossibility of excluding from the use of these services those who do not pay for them, the so-called “hare effect”, for example, national defense or street lighting. Hence the unprofitability of public goods, the unattractiveness of their production for commercial firms (for example: firefighters, emergency services.

In addition, the market is unable to solve the problem of externalities. Externalities are positive or negative effects on those who are not involved in the production or consumption of a given good.

Examples of positive externalities: a free bus to the supermarket for local residents, a good road to a wealthy mansion for everyone who will use this stretch of road.

Examples of a negative externality: environmental pollution by the enterprise, smoking in public places, etc.

Both positive and negative externalities reduce the efficiency of resource use, since in both cases the price of the good is understated. At the same time, the quantity of goods sold is artificially low in the case of a positive externality and unjustifiably high in the case of a negative externality. In the topic of market equilibrium, we will return to this issue and analyze specific situations with externalities.

The presence of "failures" of the market necessitates the intervention of the state and the formation of a mixed economic system. In mixed

private and public organizations jointly exercise economic control.

At present, a mixed market-type economy has developed in Russia.

The three main economic questions are:

What to produce?

How to produce?

For whom to produce?

Depending on how society answers the main questions, a certain type of economic system is formed: traditional, command or market.

The presence of market failures necessitates government intervention and the formation of a mixed system.

Basic concepts

Economic system Main questions of economics Traditional system Centralized system Market system Market

Private property Mixed system "Failures" of the market.

public goods

External effects

Questions and tasks

1. What is an economic system?

2. Name the three main questions of the economy. Why does every society have to deal with these issues?

3. How are the main issues solved in the traditional system?

4. What form of ownership is the main one in a centralized system, and which - in a market system?

5. What makes firms produce quality goods in a market economy? Explain why.

6. Give examples of "failures" of the market.

7. What characterizes the modern economy in Russia as a mixed market economy?

8. What are public goods and services? Why don't firms produce them?

9. "Either power or the ruble - there has been and is no other choice in the economy from the century, from Adam to the present day." How do you understand this statement by N. Shmelev?

In this lesson, we will find out what are the main questions in the economy, why it exists and how it tries to answer these main questions. We will also talk about economic efficiency and economic choice. We will try to show how the economy enters the life of every person.

Theme: Economics

Lesson: Key questions in economics

In the last lesson, we talked about the fact that resources are very limited, and the economy, in fact, is called upon to decide how to use these resources for the maximum benefit for humanity. All participants in economic processes are in one way or another in a state of choice: they choose which of the resources to use now and which to use later, which goods to produce, etc. Accordingly, in the economy there are three main questions to which she must answer: "what to produce?", "how to produce?" And "for whom to produce?". The answer to these three questions is the answer to the main task of economic processes. Let's talk about each of them separately.

Rice. 1. Basic questions of economics ()

So the first question is What goods to produce? It is clear that a person is a being who, living in a social environment, largely serves himself. Primitive people, of course, served themselves on their own. So, a primitive hunter made the items he needed for hunting: a spear, a bow and other things he needed. And in our time, each of us can do some things for ourselves on our own, or we can get these things in a different way. You can be given something, something can be inherited, and something you can buy in the market. Thus, you create your life the way you want it to be. You can become an absolutely satisfied person, all your needs and desires can be realized, but society, alas, cannot live like this because of our limited resources.

That is why all producers (they can be the state, private firms, even individuals) are in a situation of constant choice of which product they need to produce. It depends on what exactly will be in demand in the near future. Over time, the demand for certain goods changes. A century or two ago, some things were absolutely necessary, but now the need for them has disappeared, among other things, they have become archaic. Bast shoes can serve as an example of such a thing.

Being in a situation of choice, producers strive to get not only momentary benefits, but also to lay the foundations for their future production. They seek to increase their profits in the future by anticipating the needs of society that may arise.

Of course, it is very profitable for all manufacturers to produce those services or goods that cannot be refused. After all, a person cannot refuse food or clothes. But the essence of the economy lies in the presence of competition, in the confrontation between different producers, so that the consumer has the opportunity to choose whether to buy cheaper or buy more expensive. By the way, it should be explained why things are generally cheaper or more expensive. This is because the manufacturer always decides how to produce goods.

Rice. 3. The essence of the economy is competition between manufacturers ()

So we come to the second question - How to produce goods and services?. There are always a variety of ways and opportunities to produce the same product or service. The way it is made depends on what the final product will be, the decisions that manufacturers make during the manufacture of the goods. One way or another, any manufacturer makes sure that his solutions are the most effective. And under economic efficiency understand the product of a given volume of the finished product at the lowest cost limited resources. Having understood this ratio, we can understand why this or that product has such a price. The manufacturer always seeks to reduce the cost of its production, but at the same time does not want to reduce its profits in any case. This is the basis of any production, on this balance there is an economics of production.

However, there is also a third question, which we have identified today - “for whom to produce goods and services?”. It is clear that we all have different desires, we have different possibilities. Producing any product, the manufacturer seeks to please the interests of the broad masses of the population. But to do this with the help of any one service or product is simply impossible. That is why each of the manufacturers seeks to either narrowly specialize or produce a wide range of goods and services for various social strata. It does not matter whether it is a physical product or a service that does not have a physical expression, because it also has a cost and brings profit to the manufacturer.

So, in order to get the right answers to the main questions of the economy, it is necessary to know the possibilities of the economic system, the state of the market, and the factors that shape supply and demand.

As we can see, three basic economic issues put human society in a state of choice. One way or another, we have to choose where to produce, how to produce, what to produce, for whom to produce. This question is painful every time, because for some time the production of some things and services can be profitable, but then it ceases to be so. It should be understood that almost every day manufacturers are in limbo, because it is very difficult to determine the exact priorities of a person. There is a possibility that our outlook on life will change and the need for some item or service will disappear. You can give a lot of examples in the history of mankind, when some important and interesting things that a person used eventually came to naught. Such is life, such is the economy.

Consider why the quality of manufactured goods varies. The same thing on the market can have a completely different value depending on its quality. Let's take pens as an example. This is a common everyday item, well known to you. But even that can cost quite a bit. You can buy a simple and inexpensive ballpoint pen that you will use every day, or you can buy a very expensive gift pen for special occasions. But, nevertheless, it is still the same pen, writing instrument.

Rice. 4. Simple or gift - the pen is just a writing instrument ()

So where does this price difference come from? It's about human interests and desires. The manufacturer initially focuses on a specific buyer. The tastes of people are diverse: someone has more craving for luxury and a desire to surround themselves with expensive items, while other people just need to have simple and multifunctional items at hand. From the point of view of the manufacturer, it is the person with a craving for luxury, unusual things, who is a buyer who is willing to pay a large amount for the same product. The most expensive items and services are focused on it. For example, a watch can be simple in design, or it can become a complex luxury item that has a lot of additional functions and indicates the high social status of its owner. The need for them is very conditional, but the owner of such a watch is proud that he has them.

Rice. 5. Expensive watches are more of a luxury than a necessity, but the owner is proud of their possession ()

We all surround ourselves with things and objects that we need. This is how we build our lives. This is how the economy enters the life of every person.

Bibliography

1. Kravchenko A.I. Social science 8. - M.: Russian word.

2. Nikitin A.F. Social science 8. - M .: Bustard.

3. Bogolyubov L.N., Gorodetskaya N.I., Ivanova L.F. / Ed. Bogolyubova L.N., Ivanova L.F. Social science 8. - M.: Enlightenment.

3. Site for professional traders ().

Homework

1. Explain what economic efficiency is.

2. Describe the three main economic issues.

3. * Imagine that you have inherited the right to own a chain of confectionery factories. Answer the main economic questions: what exactly will you produce, how and for whom.

The main economic task is to choose the most efficient way of distributing factors of production in order to solve the problem of limited resources and limitless human desires. This position is reflected in the formulation of three basic questions of economics.

1. What to produce, i.e. which of the possible goods and services should be produced in a given economic space at a given time;

2. How to produce, i.e. at what combination of resources, and with what technology the goods will be produced;

3. For whom to produce, i.e. who will pay for these goods and services, who will extract useful properties from them, and how society's income will be distributed.

At solving the question "what to produce?" use the production possibilities curve.

Production Possibility Curve (transformation curve) - this is a graphical representation of various combinations of production of goods with the maximum use of available resources and the existing level of technology.

Consider an example:

Having depicted the data on the graph, we get the production possibilities curve (Fig. 1).

Rice. 1. Production Possibility Curve

The graph shows a production possibilities curve, each point of which represents the quantity of a good. X produced with the full use of all available resources, instead of goods Y . points A, E And F represent the production possibilities of society in the production of goods X And Y . Dot B shows that production is organized inefficiently and there are unused resources, such as labor. points C And D show a level of production that is unattainable with this technology. Such "super-efficiency" in conditions of limited resources is possible only with the improvement of technology.

This example illustrates the concept of opportunity cost. Opportunity cost a good or service is the value measured in terms of the lost opportunity to engage in the best available alternative activity that requires the same time or the same resources.

Opportunity cost is equivalent to the following concepts: replacement price, opportunity cost, opportunity cost, opportunity cost, lost profit, cost of the most preferred option.

Product opportunity cost X calculated by the formula:

AI X =,

where is the reduction in product output At , a - increase in product output X .

If Y(X) is the equation of the production possibilities frontier, then the opportunity cost of the product X are equal to the modulus of the value of the derivative of this function. The opportunity cost of a product is defined similarly. At .

The shape of the production possibilities curve is related to the influence of the economic law of increasing opportunity costs with an increase in the production of a good or service.

Law of Rising Opportunity Costs states that as the economy produces more of a given product, the opportunity cost of producing an additional unit, expressed in terms of the ability to produce other products, increases.

Solving the question "how to produce?" associated with the choice of a particular technology and the necessary resources. The production process is seen as the transformation of resources into products. The technological dependence between the resource cost structure and the maximum possible output is expressed using the production function.

production function- the relationship between a given volume of production and the costs of production factors.

Depending on resource prices and technologies used, producers choose different combinations of resources. Finding the cheapest way to create a product is an important part of their business. This problem is also facing the entire economy, since the efficiency of the national economy largely depends on its solution.

A key consideration in deciding how to produce is allocative efficiency or Pareto efficiency.

Efficiency Pareto- this is a level of organization of the economy at which society extracts the maximum utility from the available resources and technologies, and it is no longer possible to increase someone's share in the result without reducing the other . When efficiency is achieved, more of the good can be produced at the cost of losing the ability to produce something else if the factors of production and knowledge are unchanged. However, production efficiency can be increased by improving public division labor. Its important characteristics are specialization and cooperation, allowing to take into account comparative advantages in the production of goods.

Comparative advantage The ability to produce a good or service at a relatively lower opportunity cost.

The third key question of the economy is the distribution of the produced product among the members of society. It can be seen both in terms of efficiency and in terms of fairness.

Efficiency in distribution- a situation in which it is impossible, by redistributing the existing amount of goods, to satisfy the desire of one person more fully, without thereby damaging the satisfaction of the desires of another person .

Fairness in distribution interpreted differently.

Let's highlight three concepts:

1. Equal distribution;

2. Distribution based on the principle "according to work";

3. Distribution depending on the contribution to production economic resources(for example, in proportion to the labor and capital invested in the business).

The questions of what, how and for whom to produce are basic and common for all types of farms, but different economic systems solve them in their own way.