what is production and types of production? Production can also be defined as the creation of utility. All goods and services produced must possess utility, which means that they must be capable of satisfying certain human wants. Production is the creation of tangible goods such as clock, cars, tables, TV sets,
THEORY OF PRODUCTION
At the end of this chapter, students should be able to:
- Explain the concept/factor of production
- State and explain the characteristics of each factors of production
- Explain the meaning of division of labour
- State the difference between specialization and division of labour
- Identify the advantages, disadvantages and limitation of division of labour
- State the advantages and disadvantages of large scale production.
DEFINITION OF PRODUCTION
Production is defined as the various economic activities aimed at the creation of goods and services and the distribution of these to the final consumers for the satisfaction of human wants.
Production can also be defined as the creation of utility. All goods and services produced must possess utility, which means that they must be capable of satisfying certain human wants. Production is the creation of tangible goods such as clock, cars, tables, TV sets, houses and books as well as services rendered by some professionals such as doctors, lawyers, hairdressers, soldiers, police, teachers and auto mechanic.
It should be noted that production is said to be complete when the goods and services produced get to the final users or consumers. The production process involves three major groups of people. These are producers, distributors and consumers.
TYPES OF PRODUCTION
Production is grouped into two major categories. These are direct and indirect production.
Meaning: Direct production is the type of production in which an individual produces goods and services only for family use or consumption. The goods and services so produced are not for sale, rather they are to be used by the family. It is usually very small in size and family labour is usually employed.
Meaning: Indirect production is the type of production in which goods and services are produced in large scale, mainly for sales or exchange for other needs. This type of production involves the use of modern equipment and skilled labour to be able to make surplus goods and services that the producer would exchange to get money, which he will use to satisfy other wants.
It is practically impossible for a single producer to satisfy all his wants without depending on others for exchange of goods and services.
Indirect production is sub-divided into three major groups. These are primary, secondary and 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 or resources in their natural form from the land, air and water. Primary production forms the basis for further production. Examples of primary production are agriculture,mining, fishing and lumbering.
Secondary production involves the transformation or conversion of basic raw materials or semi finished goods into final forms that are acceptable to the consumers. Secondary production embraces all forms of manufacturing and construction.
The raw materials or resources obtained from the extractive sector are transforming into finished products such as processed food, houses, roads, clothes and cars.
Tertiary production is concerned with the provision o commercial and professional service to the people. The goods so produced at the primary and secondary production levels are distributed to the people for consumption. The people: involved in this aspect of production are those in the commercial services like wholesalers retailers and transporters, as well as those involved in rendering professional services like soldiers, police, doctors, lawyers, musicians, hairdressers and teachers.