Sample Economics Essays on Production Decisions
The diagram under consideration is a representation of a production curve that illustrates the cyclical production entailing booms and recessions. The production curve affects production decisions to be made by an enterprise as it reflects the existing demand and costs to be incurred in the production process. It should be considered that the periods characterizing recession in the economy affect the production in a number of ways. During recession, the economic situation is strained and the business entity can barely meet its operational needs. At the same time, the level of demand is relatively low, so the company will react by a reduction in production in order to avoid possible financial distress as a result of potential wastes.
The peak in the production curve represents the boom – the point of high production in the economy and improved demand. At this point, the financial potential of the economy is high, which grants consumers the ability to buy products. In this regard, the enterprise’s production decision will aim at improving the production capacity so as to meet the increasing demand (“Chapter 8” 65). Another decision will be to ensure the increased availability of resources, which are central in every production process.
Notably, the aspect of employment will also be highly affected based on the production curve. During recessions, suspension of some workers will be critical in order to support the production activities with the limited resources. On the other hand, during booms represented by the peaks, the company will need to increase the number of employees in order to meet the increased demand on the market. In any case, it is essential for the enterprise to carefully analyze its capacity utilization to make optimal production decisions.
“Chapter 8. The Business Enterprise I: Production and Costs”, pp. 57-66.