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Tuesday, 25 October 2016

Economics- What is Production? [Detailed info including the types, stages and factors]
The term Production can be generally as the transformation of raw materials into finished goods and the distribution and provision of goods and services to satisfy human wants.

It can equally be said that Production is the creation of utility. Utility is the ability of any commodity or service to satisfy human wants. Production is said to be completed when the goods and services produced get to the final consumers.

What are the types of good that can be produced to satisfy human wants?
Below are the several types of good;
Consumer goods-: These are goods and services that can satisfy the consumer immediate quest or want. These goods don’t need further process of production for their use by the consumers. Examples of consumer goods are beer, milk ,bread, services of a publisher, services of an affiliate, services of a lawyer, accountant or a seamstress to mention a few.

Capital goods-: These are goods and services that are meant for the production of further goods and services. Examples include ‘machine’, ‘cars’, and ‘lorries’ used in carrying out productive activities, etc.

There are various types of Production. They are divided into two [2] major types- Direct and Indirect Production.
Direct Production takes place when a family unit produces goods and services mainly to satisfy all their needs. This type of production, all goods and services produced are mainly to satisfy the immediate needs of a family, it requires no sale of goods produced.
While;
Indirect Production involves the production of goods and services for exchange in order to use the money realized to satisfy the producer’s other wants. This type of production involves the sale of goods and services to satisfy other people’s needs in exchange of a fee or service.

Stages of Production
Production is divided into three [3] broad categories. Thus, these include;

Primary Production- This type of production involves the extractive industry where the occupations of people are directed to the process of extracting raw materials from the soil or sea. Examples are farming, fishing, mining, quarrying and so on.
Next is the Secondary Production-
Secondary Production- This is a stage where raw materials are extracted from the soil are seen and processed and transformed into finished goods. Examples are Manufacturing, and Construction industries etc.

Tertiary Production- This is the stage of production where the goods and services produced at both the primary and secondary production levels are taken to those who are in need of them [final consumers]. Tertiary Production completes the production processing. Examples- the distribution of goods, communication, banking, teaching, tourism and insurance. Etc.


Factors of Productions
Factors of production refer to agents, components, or resources which are combining together to produce goods and services. There are four [4] factors of production. These are:-
Land
Capital
Labor
Entrepreneur

Land –
Land is defined as the free gift of nature. Land does not only include land surface of the earth but all other free gifts of nature or natural resources like the forest, mineral resources, water [ocean], atmosphere etc. Unlike other factors of production, the supply of land is limited. The reward for land is “rent”.

Attributes or Characteristics of Land
Land is immobile, i.e. land cannot be moved from one geographical location to another.
Land is a free gift of nature.
The supply of land is fixed. This indicating that land the quantity of land cannot be increased.
Land is subject to diminishing return. This indicating that when a piece of land is frequently used for cultivation, it becomes less productive.

Variability – The quantity of land varies from one place to another, as some areas of land are more fertile than the others.
Land has no cost of production.
Land is heterogeneous- no two portions of land are the same values or other characteristics.

Capital
Capital may be defined as man made assets used in production, that is, wealth or goods used to produce other goods and services. Examples of capital include rake, cutlass, cash, machines, buildings, motor vehicles, raw materials, semi-finished goods, tools and other equipment used in the production of goods and services. The reward for capital is “interest”.

Attributes or Characteristics of Capital
Capital is subject to depreciation.
Capital ensures large scale production.
It promotes division of labor.
Capital exist in different forms ,which may be physical like buildings, vehicles, palnts , and other machineries or liquid like cash or money.
Capital is durable
Capital is man-made

Labor
Labor as a factor of production is defined as all forms of human efforts put into production. It also refers to man’s mental and physical exertions generated in the process of production. The reward for labor as a factor of production comes in form of wages and salaries.

Types of labor-
There are two major types of labor stately;
Skilled and Unskilled labor
Skilled labor- This category of labor make use of their mental effort in productive activities. This labor has undergone a relatively long and specialized type of training in institutions of higher learning. Examples are Mechanical Engineering , Chemistry, Civil Engineering and lots more. Jobs by the categories of workers are referred to as white collar jobs.
Unskilled labor-
This category of labor requires little or no formal education. They do not use mental effort; rather they make use of physical efforts or energy in production. As a result of their low level of education, with some kind of training, they are usually employed as guards, messengers, cleaners , drivers and other places of employment.

Attributes or Characteristics of labor
Labor is mobile [can be moved from one geographical zone, occupation to another]
Labor is skillful- labor becomes skillful through education and training.
Labor has feelings- labor cannot be used anyhow as its concert must be sort before it is used in production.
Labor is not fixed as it varies in quantity and quality.
Labor is a human factor, hence, its supply can easily be controlled.


Entrepreneur
Entrepreneur can be defined as the factors of production that co-ordinates and organizes other factors of production [ land, labor, and capital] in order to produce goods and services. The entrepreneur bear the risks and takes major decisions of the business. The reward for entrepreneur is “profit”.

Attributes or Characteristics of Entrepreneur
Risk bearing- the risks I the cost of investment and what comes out of it, whether good or bad, he has to accept them.

Organization – it organizes productive resources for the production of goods and services.

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