Why Absolute Levels of Productivity Are Irrelevant in Determining Specialization Patterns - Assignment Example

Outline why absolute levels of productivity are irrelevant in determining specialization patterns and why relative levels of productivity are the relevant consideration in the decision to allocate workers between various tasks. Absolute level of productivity are termed as irrelevant in determining the specialization patterns because in any organization or in any work place the solutions which are related to the closed form are derived in order to have the factor related to the immobility case. It is not necessary to have the better level of productivity if the working conditions or patterns are in the right direction or way. (Hall, pg 540) In order to determine the absolute level of productivity, deep insight is required with the help of which one can very easily evaluate the pros and cons of the work and can measure the level of productivity or output. Whenever, any task is decided and further work is needed in order to fulfill all the requirements of the tasks, workers are required and that particular task is then divided into them in order to generate better outcome. Relevant and important levels of productivity are term as an important area, which should never be ignored or neglected, and the work should be done in an appropriate manner in order to avoid any kind of difficulty. Absolute level of productivity is an important issue and every single firm or any department works very hard in order to generate better and enhance level of productivity. In our economy, absolute level of productivity is termed as an important element but apart from all its importance, the main and important element is to understand the concept and also to understand the idea, which is limited to the meaning of productivity. Allocation of workers between different tasks is an important element; this should be viewed carefully in order to generate well effective outcomes. If the task is divided in an appropriate manner among all the workers or employees, then the level of productivity can be measured in a proper way and the outcome will be in a positive direction. This can give many benefits to the overall working environment and the outcomes can thus generate well effective results for the firm. (Hall, pg 540) Determining or measuring absolute level of productivity is a difficult task, which should be measured in an appropriate manner in order to know how well a firm is performing. Working is such conditions where productivity can be measured and the processes can be measured with the help of which one can know how to produce and in what ways to produce, in order to generate well effective output. Every single level should be measured while working or while accomplishing any task in order to make sure that how well an employee or group of people are working in order to generate well effective outcomes. One should know that how to measure all the levels and how to have an optimum level of output. Productivity is an element, which actually tells us how a firm is performing a task and how a firm is generating from that particular task. Measuring the levels of output is no doubt a difficult task and it should be measured in proper and in well-organized way in order to overcome any further misconceptions or problems. (Hall, pg 540) 1. Demonstrate why the theorem of comparative advantage is relevant to the question of how a firm should allocate a given amount of output between the various factories that it might operate i.e. where it should produce the output. Comparative advantage actually leads towards the process of trade. By process of trade, we means the method with the help of which as a nation we exchange goods to other nation which they can produce by more easier methods as compare to other methods or process which are somewhat unable for them. The advantage of this method is usually seen in various resources, which are related to the raw materials as well as to the labor. Comparative advantage is an important as well as a useful concept with the help of which we can very easily understand the concept of the regional specialization. By this method all the nations or regions do benefit each other by exchanging goods which they make the best and by this, the do help other nations. This system can only work properly if the free trade system is easily available and it is permitted to all the nations. In comparative advantage, one main and important problem is the overdependence, because with the help of this method, many nations do relax largely and by this they do lack in many areas and in, the end suffers a great loss. (Krugman, pg 706) This theorem of comparative advantage is very much useful as well as relevant in determining the fact that how the firms should allocate the output. The output which the firms produces is very much important and the owners should make this important element very much possible in order to make a schedule and also to make a proper check and balance system with the help of which they can know that how to produce and then where to allocate. Allocation is termed as an important element and it should not be ignored. what so ever, amount is being produced by any firm, the allocation should be decided in a proper manner in order to avoid any misconceptions or problems and also to make sure that the goods are being allocated in a proper way and also in a proper directions. Apart from this, we can also see that all those conditions which some how maximize the comparative advantage do not resolve any kind of trade deficits. Here we can see some real world examples where the comparative advantage may some how require a trade deficit. For instance we can say that the amount or the level of goods which is being produced can some how be maximized, yet along with this it may involve the method of transferring the wealth from one nation or county to another nation or country. This is only possible because many agents of the nation has different saving rates and this generally increases the rates and thus results in some problems. All these problems should be resolved by allocating the resources well and in proper directions. The allocation should be done in a proper and in a well-maintained manner in order to make sure that every single firm is being catered and all the needs and demands are fulfilled. Allocating the produced items to the other firms is an important task and it should be catered in a proper way in order to generate proper outcome. With the help of this technique later on, that particular firm will also cater your firm, and by this, a better and well-maintained business will be established. This method is termed as the best method with the help of which one firm can help the other firm and later on, the outcomes will be the bets one. (Krugman, pg 706) 2. Discuss how the theorem of comparative advantage is applicable to the question of whether to undertake productive activities within the firm itself or whether to contract them out. Show how your discussion is relevant to the question of why firms exist. As mentioned above the theorem of comparative advantage is no doubt an important theorem and it requires a lot of deep study in order to know more and more about it. According to this theorem, the productive activities of any firm or organization should undertake within the firm as well as outside the firm. The main aim is to provide the goods to those areas, which actually need them. If the need is within the firm then the goods should be provided within the firm or if the need is outside the firm, then it should be provided outside the firm. The more efficient way is to provide the goods outside the firm because in this manner later on those firms can benefit you too. Usually all the firms exist as an alternative system which is some how directly related to the mechanism of market when it is said to be more effective as well as efficient in order to produce the goods in a non price based environment or conditions. For instance, in a labor market, it might be termed as a difficult or a costly task for all the firms or for all the organization in order to engage in the production system when they are suppose to hire and are also suppose to fire their own workers depending on their demand or supply conditions. (Mankiw, pg 872) Comparative advantage as mentioned above is a technique or method with the help of which one can benefit other nation or country by giving its goods and services. This theorem is very much applicable while undertaking the production based activities outside the firms. While allocating your goods to other firms, the firm itself will measure all the pros and cons and in the end generate better and better outcomes. This is an important technique, it should be measured, and the steps should be taken in order to allocate all the goods outside the firm, which are needed, by any nation or firm depending on their needs and demands. From this theorem of comparative advantage, we can also make this description very much clear which is related to the fact that why firms exists. Firms basically exists as an alternative system towards the market mechanism when it is termed as more efficient as well as effective in order to produce good or services in a non-price based environment. Firms exist in order to cater the needs as well as the demands of all the people and of all the other industries or firms with whom it is working. as mentioned earlier, the comparative advantage is termed as a legal phenomenon with the help of which a firm can cater the other firm with the help of its goods and services, same is the situation which is linked with this statement that why firms exists. Firms usually exist in order to cater the needs as well as the demands of all the other firms or people. Firms or other organizations are usually there in order to generate well effective outcomes by working well, by generating well and in the end by catering the needs and demands of all the people who are working with you and who have some kind of partnership with you. Catering the needs as well as the demands is the necessary element, which should never be ignored, and every one should keep this main thing in mind that generating better and better goods as well as the services is an important task with the help of which one can generate better outcome. (Mankiw, pg 872) In this paper, all the above discussions elaborate the meaning of firms and the meaning or production. Firms are usually there in order to produce the goods as well as the services. The main element is the goods, which are being produced by many firms in order to cater all the other firms. Business is to help the other firm so that later on that firm can help your firm. This phenomenon is termed as an important phenomenon, which should not be ignored, and the firms should strive hard in order to generate well-oriented outcomes with the help of which they can cater well all the other firms and businesses. Better working methods as well as procedures are required in order to generate well-oriented outcomes and also to be the best one. Measuring all the level of output or productivity is an important as well as a difficult task and it should be done in an appropriate manner in order to generate the best outcomes. Comparative advantage is therefore termed as an important element, which measures all the methods with the help of which resources can be distributed well and the outcomes can be measured in an appropriate manner. (Mankiw, pg 872) REFERENCES Krugman, (2009), International economics: theory and policy, Pearson Education India, page 700-706. N. Gregory Mankiw, (2008), Principles of Economics, Cengage Learning, page 800-872. Peter A. Hall, (2001), Varieties of capitalism: the institutional foundations of comparative advantage, Oxford University Press, page 500-540. Read More