Classification Of Production, Meaning, Importance

Hi, welcome to this blog on the meaning and classification of production.

Table Of Contents

At the end of this art, student should be able to:

1. Define the meaning of production
2. Classification of production
3. Factors that determines the volume of production.
4. Importance Of production
5. Revision questions

Meaning Of Production

Production can simply be defined as the creation of utility or production in the creation of goods and services which satisfy human wants. All goods and services produced must possess utility, which means that they must be capable of satisfying certain human wants. Production can be also defined as the transformation of raw materials into finished goods and their distribution to the consumers to satisfy their wants.

Production also means 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 include 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, soldiers, lawyers, hairdressers comma police, teachers and mechanics.

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.

Classification of Production

Production is grouped into two major categories. These are direct and indirect production.

(a) Direct 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 produced are not for sale, rather they are to be used by the family. It is usually very small in size and family labor is usually employed.

(b) Indirect Production

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 labor to be able to make surplus goods and services that the producer would exchange to get money, which he will use to satisfy other one. It is basically impossible for a single producer to satisfy all his wants without depending on others for exchange of goods and services.

Indirect production is subdivided into three major groups. This are primary, secondary and tertiary production.

1. 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.
2. Secondary Production: Secondary production involves the transformation or conversion of basic raw materials or semi-finished goods into final consumers. Secondary production embraces of all forms of manufacturing and construction. The raw materials or resources obtained from the extractive sector are transformed into finished products such as processed food, houses, roads and cars.
3. Tertiary Production: Tertiary production is concerned with the provision of commercial and professional services to the people. The goods produced at the primary and secondary production levels are distributed to the people for consumption. The people involved in this aspect of production includes those in the commercial services like wholesalers, retailers and transporters, as well as those involved in rendering professional services like soldiers, policemen, doctors, musicians, hairdressers and teachers.

Factors that Determine The Volume of Production

1. Amount of capital
2. Availability of raw materials
3. Management
4. The market size
5. Deficiency of other factors of production.
6. Level of technology
7. Storage facilities
8. Nature of the goods

Importance of Production

Production is important because of the following reasons:

1. Availability of goods and services: Production helps to ensure that goods and services are made available for use by human beings.
2. Improvement in standard of living: Production helps to ensure adequate improvement in the standard of living of the people.
3. Provision of employment: Continuous production ensures the employment of many people.
4. Increase in wealth of people: Production assist people to accumulate wealth as a result of continuous employment.
5. Increase in export potential: Production also assist a state or nation to boost her export of goods and services to other nations.
6. Acquisition of skills: The engagement of people in production makes them acquire special skills.

Revision Questions

1. What is production?
2. What are the 2 main classification of production?
3. Short note on the following (a) primary Production (b) secondary production (c) tertiary production
4. Five importance of production