Definition Of Production
Production can be defined as the creation of utility or the creation of goods and services for the purpose of satisfying human wants.
It is the transformation of raw materials into finished goods and their distribution to the consumer in other to satisfy their wants.
Production is a process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output). It is the act of creating output, a good or service which has value and contributes to the utility of individuals.
Economic well-being is created in a production process, meaning all economic activities that aim directly or indirectly to satisfy human needs. The degree to which the needs are satisfied is often accepted as a measure of economic well-being. In production there are two features which explain increasing economic well-being. They are improving quality-price-ratio of commodities and increasing incomes from growing and more efficient market production.
One major thing about production is that it is not complete until it gets to the final consumers.
Stages and types of production
Production is categorized into two major parts, which are:
Direct and indirect production
The Direct Production
Direct Production: This is when an entity is capable of producing all of the materials necessary for their product production by using their own skill sets without focusing on one product or requiring a staff to perform different jobs.
Direct production also mean the type of production in which an individual produces goods and services only for the family use or consumption, the goods and services produced are not for sale but for the family consumption.
Indirect production: The production of an item necessary for the manufacturing of major services and goods. Indirect production is an economic term that refers to the process of producing something in an indirect manner. This may be achieved through the use of another item for the production of the final good, or it may be achieved through the production of something to be used as a means to obtaining another item. In either case, the item that is produced is merely used as a means for the production or procurement of the final item. It is the type of production of goods and services mainly for sale or exchange for other needs.
An example of indirect production can be seen in the production of an item expressly for the purpose of producing other items. Usually, the indirect product is a form of machinery or equipment that is used to produce other objects. For example, a company that makes prefabricated houses might construct patented equipment that serves as a mold for the construction of a portion of the exterior for the prefabricated homes. In this case, the machinery is merely the means that is used for the production of the final product and is consequently a form of indirect production.
The Indirect Production
Indirect production is sub divided into three major groups, which are:
- Primary production
- Secondary production
- Tertiary production
Primary production: Primary production refers to the extraction of raw materials provided by nature. It is concerned with the process of obtaining raw materials in their natural form, from land, water, and air. Examples of primary production are agriculture, mining, lumbering, fishing,
Secondary Production: Secondary production involves the transformation or conversion of raw materials into finished goods, the extractive materials from the primary production are converted into goods the consumer will find consumables. Examples are clothes, processed food, cars, beverages etc.
Tertiary Production: This is the provision of professional or commercial services to people; it is the means by which the foods produced at the primary and secondary level are distributed to the people for consumption. Those involved in this aspect of production are the retailers, wholesalers, and those involve in rendering professional services like lawyers, doctors etc.
Importance of Production
The following are importance of production
- increasing the quality and specification of the product
- providing superior levels of service in providing the product
- enhancing the image of the product through marketing
- Availability of goods and services
- Improvement in the standard of living
- Increase in the wealth of people
- Provision of employment
- It helps in the acquisition of skills
- It helps in the development of a country
- Provide increase in export potential
Test and Exercise
- The transformation of raw materials into finished goods and their distribution to the consumers to satisfy their wants is (a) specialization (b) division of labor (c) production (d) occupation.
- The major types of production are (a) direct and indirect (b) primary and secondary (c) specialization and non specialization (d) utility and satisfaction.
- Production can said to be complete when the goods and services get to the (a) producer (b) wholesaler (c) consumer (d) retailer.
- All of these are the types of indirect production except (a) primary (b) formal (c) tertiary (d) secondary. ans (b)
- The type of production where individual produces goods and services only for the family use or consumption is (a) primary production (b) indirect production (c) tertiary production (d) direct production.
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