What is Production – its types and stages?
What is Production?
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 Goods
- Consumer Goods: These are goods and services that can satisfy the consumers’ 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 service of a teacher, lawyer, barber, etc
- 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: this takes place when a family unit produces goods and services mainly to satisfy all its needs and not for sale. This kind 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: this 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 which are;
- Primary Production: this type of production involves the extractive industry where the occupation of people is directed to the process of extracting raw materials form the soil or sea. The goods and services produced at this first stage of production are known as raw materials. Examples of this kind 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. Example of this includes distribution, communication, banking, insurance, tourism, teaching, legal services, etc.
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