Abstract
Fixed production factors have previously been defined as being production factors the quantity of which cannot vary within the planning horizon under consideration. Hence, they are characterised by the fact that the company is unable/unwilling to buy or sell production factors.
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Notes
- 1.
The marginal factor costs of production factors that are owned by the company represent the income forgone from not renting out the production factor in question (e.g. to the neighbour). With regard to the opportunity cost principle, the income forgone in connection with the best alternative usage should be used.
- 2.
In practice, this is seldom done, even for production factors that are easily recognised as being completely variable. Normally, so-called transaction costs would be involved which reflect the difference between the purchase and the sales price.
- 3.
Assume that the value of the property with the asset is MU A, the value without the asset is MU B, and the sales price of the asset is MU C. The fixation index (FI) can then be calculated as: FI = (A−B−C)/(A−B). If e.g. C = 0 then FI is equal to 1, corresponding to an entirely fixed asset. If C = A−B then FI is equal to 0, corresponding to an entirely variable asset.
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© 2013 Springer-Verlag Berlin Heidelberg
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Rasmussen, S. (2013). The Fixation of the Production Factors. In: Production Economics. Springer Texts in Business and Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30200-8_12
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DOI: https://doi.org/10.1007/978-3-642-30200-8_12
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Publisher Name: Springer, Berlin, Heidelberg
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Online ISBN: 978-3-642-30200-8
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