Production – its meaning, types, stages and factors affecting it.
Production may be defined as the transformation of raw materials into finished goods and the distribution and provision of goods and services in order to satisfy human wants.
It can equally be said that production is the creation of utility, while 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 reach the final users or consumers. Raw materials on the other hand are the unfinished goods or those materials put together in order to get a commodity. These raw materials are put together into finished goods through human efforts with or without the help of machines.
Types of GoodsÂ
(i) Consumer Goods: These are goods and services that can satisfy the consumer’s immediate wants. These goods do not need further process of production for their use by the consumer. Examples of consumer goods are beer, milk, bread, radio, television, the services of a teacher, lawyer, barber, etc.
(ii) Capital Goods: These are goods and services meant for the production of further goods and services. They are for instance; machines, cars and lorries used in carrying out productive activities, etc.
Types of Production
Production can be divided, into two forms namely direct and indirect production.
Direct Production: Direct production takes place when a family unit produces goods and services mainly to satisfy all its needs and not for sale. This type of production is very common in a subsistence economy where subsistence farming is predominant. Such subsistence farmers produce not for exchange but for consumption by them and their families. Indirect Production: Indirect production involves the production of goods and services for exchange in order to use the money realized to satisfy the producers other wants. This type of production takes place because, it is not possible in the modern society for anybody to satisfy all his needs directly with his own goods and services. In modern industrial economy, the society has become inter-dependent. People satisfy their wants indirectly by exchanging their surplus outputs with other producers or selling their goods and services and using the money realized in satisfying their numerous wants.
Stages of Production
The economic activities involved in production are so vast that production is divided into three broad categories viz;
Primary Production: This type of production involves the extractive industry where the occupation of people is directed to the process of extracting raw materials from the soil or sea, The goods and services produced at this first stage of production are known as raw materials. Examples of this type of production are farming, fishing, mining, quarrying etc.
Secondary Production: This is a stage where the raw materials extracted from the soil and sea are processed and transformed into finished goods. That is, utility is added to the raw materials of the primary production. The manufacturing and constructive industries are involved in this stage of production.
Tertiary Production: This is the stage of production where the goods and services produced at the above two stages are taken to those who need them. This stage completes the production processes since production is not complete until the goods and services produced reach the final consumers, e.g. distribution, communication, banking, insurance, tourism, teaching, legal services etc.
Factors that determine the volume of productionÂ
The quantity and quality of factors of production (i.e. land, labour, capital and entrepreneur). The above factors determine the volume of production in a lot of ways e.g. the amount of capital determines the labour to be hired and raw materials to be bought, The quality and quantity of land available determines the agricultural products or output and the size of factory to be built. The efficiency of labour determines to a large extent the amount of goods to be consumed.
Generally, the availability and the efficiency or inefficiency of the factors of production determine the volume of production.
The Size of Market: The size of market here talks about the extent the products produced are in demand, This is because production is tailored according to demand.
The Nature of the Product: If the goods are durable in nature, more can be produced and stored. On the other hand, perishable goods have to be produced based on the ones that can be sold at that time since they cannot be stored for a long time.
Availability Of Raw Materials: The raw materials available will determine the quantity of goods that will be produced. If the raw materials available are not enough, production will be adversely afffected.
The Management: The efficiency or inefficiency of the management of the firm plays significant role in determining the volume of production. If the management is efficient, more goods will be produced and vice versa.
The Attitude of the Workers: The attitude of the workers of a firm to work has a lot of influence in determining the volume of production. If workers show negative attitude to work, it will affect the volume of goods to be produced.
Storage Facilities: Availability of these encourage mass production because the higher the cost of installing storage facilities, the less the volume to be produced and vice versa.
Division of Labour: The application of division of labour or its non application determines the volume of production. If it is applied, it will make workers to become specialists in their different stages of production and increase the volume of production and vice versa.
The Level of Technology: The level of technology used in production determines to a great extent the volume of production. For instance the application of machines and human labour in production will increase the level of productivity and vice versa.
Government Policy: This has to do with the nature of economic policy of the government. The more favourable the government economic policy, the more the volume of goods to be produced and vice versa.
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