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Production

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12 views5 pages

Production

Uploaded by

prosperakhidenor13
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Topic: Production

Meaning of production

Production is the transformation of raw materials into finished goods and their distribution to
consumers. Production is the creation of utility(satisfaction). Production process is not complete until
the goods produced gets to the final users(consumers).

Importance of production

(i)Creation of employment opportunity


(ii)Increase in the quality and quantity of goods
(3)Improvement in the standard of living
(4)Increase in the rate of export
(5)Increase in the wealth of the people.

TOPIC: Classification of production

Objectives: At the end of this lesson, I should be able to;

(i)Distinguish between direct and indirect production

(ii)Explain the various stages involved in indirect production.

Direct production is the production of goods and services by an individual for their own
use for example planting a small vegetable farm for home use.

Indirect production is the production of major goods and services for sales. Indirect production
is divided into:-
(i)Primary production: This is concern with the extraction of raw materials from the sea,
ground and air. It forms the basis for further production. Examples are farming, mining, fishing
and lumbering.

(ii)secondary production :This involves the transformation of raw materials into finished goods
in order to satisfy consumer’s needs. Those who are involved in the manufacturing of good are
under secondary production.

(iii)Tertiary production: This is concerned with the provision of commercial and professional
services to the people. Goods produced by the primary and secondary stages of production are
distributed under tertiary production.

Factors that determine the volume of production

(i)The availability of capital

(ii)The availability of raw materials

(iii)The efficiency of other factors of production used in production

(iv)The size of the market i.e the extend of demand and supply for goods

(v)Level of technology applied in production

(vi)The availability of storage facility

(vii)The efficiency of the management

FACTORS OF PRODUCTION

These are the inputs or resources which are combined together to produce goods and services.
These include: -

(i)Land

(ii)Labour

(iii)Capital

(Iv)Entrepreneur

(i)LAND: This refers to natural resources required in production process. It include both the
earth surfaces as well as natural resources like oil, coal, water etc. It is a free gift of nature. The
reward for land is RENT.

Characteristics/ Attributes of land as a factor of production


(i)It is an immobile factor of production.

(ii)The reward is rent

(iii)It is a free gift of nature

(iv)It subject to the law of diminishing returns.

(v)The quality and value of land vary from one place to another.

(vi)Land has no cost of production.

(vii)It is fixed in supply

Importance/uses of land

(i)Agricultural/farming purpose
(ii)And is used for wildlife conservation
(iii)Land is used as a collateral security
(iv)Land is used for construction of roads, airports and railways.
(v)For recreational purpose
(vii)Land is used for building houses

(b)LABOUR: Labour is all human effort both physical and mental directed towards production.
The reward for labour is WAGES AND SALARIES

TYPES OF LABOUR

(i)Skilled labour: This is a type of labour that requires training, experience and knowledge to
carry out work effectively and efficiently. E.g graduates like engineer, doctors, teachers, etc

(ii)Unskilled Labour: This is a type of labour that does not require any formal training or special
skills to carry out his duty. Eg cleaner, gardener and gateman.

(iii)Semi-Skilled Labour: These are workers having some special training to carry out their
jobs. Eg machine operator, clerical staff etc.

Importance of labour

(i)Provide the skills needed for production


(ii)Helps to operate machines needed for production
(iii)Production of goods and services
(iv)Influences other factors of production
(c)CAPITAL: This is the wealth set aside for the production of more wealth. It is a man -made
factor of production. The reward for capital is INTEREST.

Characteristics of capital

(i)It is a man - made factor of production


(ii)It is subject to depreciation
(iii)It promotes division of labour
(iv)It ensures large scale production
(v)Capital exist in different forms.

Types of capital

(i)Fixed capital: These are long lasting tangible assets of an organization that are not used up
during production processes. They are assets of permanent nature. Examples are land and
building, machinery, equipment etc

(ii)Circulating capital/Working capital : This is the capital used for the day to day running of
the business. Eg raw materials, cash in hand, work in progress etc

(iii)Social capital: These are social amenities or infrastructural facilities provided by the
government to ensure efficiency in productive activities. e.g electricity, airports, seaports etc.

(iv)Capital Owned: It is the owner’s interest in the business. This is the excess of assets over the value of
its total short and long term liabilities. It is the net worth of a business.

(v)Liquid capital: This is made up of assets that can easily be converted to money within a short period
of time. e.g debtors, bank, …etc

(vi) Loan capital: This is the total amount of money a business borrowed from external sources. It is a
term applied to debentures and other fixed loans.

Importance of capital

(i)It facilitates production


(ii)It improves the efficiency of other factors of production
(iv)Helps to improve people’s standard of living
(iv)Capital makes available different varieties of goods

(4) ENTREPRENEUR: This is the coordinator or the organizer of all other factors of production
for efficient utilization of productive resources. Entrepreneur is a person who decides,
coordinates and control other factor of production. The reward of an entrepreneur in production
is PROFIT or LOSS

FUNCTIONS OF AN ENTREPRENEUR

(i)Bears the risk of the business


(ii)He is the decision maker of the business
(iii)Provides capital for the business.
(iv)Coordinates other factors of production.
(v)Remunerate other factors.

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