Assigning Resources

Since the factor of decreasing yield guarantees that, with time, a process of production can become too costly; a society normally assigns their limited resources in an ample way to a lot of different processes of production.

In order to understand why this happens, imagine that you can assign some workers to recollect oranges. You can sell each orange at a certain price but the production of this fruit has decreasing yield, which means that the additional collectors of fruit increasingly produce less of the product.

It is non productive for example to assign all the workers to recollecting fruit because the amount of the product that will be obtained with the last assigned worker to the recollection will be much less then the product that would be obtained with the first worker.

The logical thing would be to remove one worker from recollecting the fruit and assign this person to recollect something else. As the last collector of fruit, it is evident that he or she will not be able to recollect a lot of fruit but the first collector of another fruit will be able to get a lot more. Since the employer will be paying the same salary without caring which specific fruit is recollected, the employer will be using this work in a more intelligent way, especially if the fruit, no matter which it is sold at the same price.

You might also want to assign a second worker and perhaps even a third or fourth to recollecting another fruit such as pears. However since decreasing yield occurs in the recollection of pears as it does with oranges, it is not convenient to transfer all of the workers. Each additional worker assigned to the recollection of pears produces less then the one before. at a certain moment, transferring the additional workers to the recollection of pears will no longer be beneficial, which means that you will have reached a point that economists call an optimal assignation of your work resources. When you have reached this optimal point, you will no longer have incentives to transfer workers that recollect fruit to recollecting another one, because an additional transfer of workers does not increase the total recollection of the fruit. At this point, you will have maximized your recollecting potential of fruit.

Beginner Money Investing Producing the Right Goods in the Right Way Determining What Is Possible To Produce Classification of Production Used Resources Obtaining Less of a Good Thing: Decreasing Yield Assigning Resources Graphic Representation of Production Possibility