The Nature of Production


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The Nature of Production

  1. 1. By: Kim Delisser
  2. 2. Definition:1. The creation of goods and services to satisfyhuman wants.2. The act of producing; creation; manufacture.
  3. 3. Production is said to take place when inputchanges to output.Primary human needs arefood, shelter, clothing, etc. along with secondary(social) needs and tertiary needs (achievement orself-esteem). These are examples of goods andservices that persons would find it difficult to
  4. 4. The levels of production basicallydescribes the manner in which people wants andneeds are satisfied.
  5. 5. Traditional or Subsistence ProductionDomestic or Local ProductionSurplus or Export Production
  6. 6. This is known to be the basic level ofproduction. This level I where people sought toprovide for just their basic survival, no more, no lesssuch as food, clothing and shelter. It is said that thislevel of production was mostly practiced by tribesand that they find it difficult to survive duringfloods, drought, etc..
  7. 7. An example of traditional productionwould be: members of a family that dofarming, fishing, and so on just to fed his/herfamily members only. They do not provide forpersons who they are not related to.
  8. 8. This is the level of production that uses localinputs such has: land, labour, capital and enterprise. Itis the production of goods and services for the needsof the family and the country. It is the trading of goodswithin the country, and is very important because itenables a country to rely on its own resources ratherthan import from other countries.
  9. 9. An example of domestic production is alocal farmer who produces root crops likeyam, potato, and so on, but also citrus fruits andbananas for his family and for his/her countryhas well.
  10. 10. This is the level of production that is overand above the domestic needs of a country andis a feature of mature or developed economies.The needs of the family, country and exports aresatisfied.
  11. 11. An example of surplus production wouldbe where an organization produces goods for thecountry and its people as well as for exports.
  12. 12. The factors of production are resourcesrequired for the manufacturing for the differenttypes of goods or services in the attempt to makean economic profit. They are said to be rewardedfor the contribution that they make towardsproduction.
  13. 13. LandLabourCapitalEntrepreneurship
  14. 14. This factor of production refers to the landitself and its natural resources that itoffers, including the sea. It can therefore bereferred to a free gift of nature and is consideredthe most important factor of production.Hence, without land production would not beable to occur.
  15. 15. One should bear in mind that these naturalresources comes from above and below the earth.Land can further be subdivided into renewableand non-renewable resources.
  16. 16. Renewable resources are resources that canbe replaced as quickly as it is used. Continuallyreplaced. Examples are:trees, fishing, agriculture, forestry, and so on.
  17. 17. Non-renewable resources are resources thatcannot be replaced after they have been used.Cannot be replaced after being consumed.Examples are: bauxite, oil, coal, and so on.
  18. 18. Renewable Resources Non-Renewable ResourcesTrees BauxiteFishing OilAgriculture CoalForestry LimestoneWater (by nature e.g. rainfall) Asphalt (pitch)Diagram 1: Examples of renewable and non-renewable resources.
  19. 19. This factors of production refers to thehuman inputs of work to produce the goods andservices. The power to work; human effort ofany kind that can either be manual (working withthe hands such as carrying, cutting), or mental(using the brain such as trading, accounting).
  20. 20. It involves the physical and mental efforts ofindividuals as the convert natural resources infinished goods and services. Labour can beclassified as: unskilled, semi-skilled, skilled andprofessional.
  21. 21. There is no special ability required toperform tasks, examples, men who carry blocksand buckets on cement on a construction site.Examples are: dishwashers, garbage men, shopkeepers, and so on.
  22. 22. The ability and skills to do a particular taskis only partially developed. Examples are:nurse’s aide, waiter/waitress, and so on.
  23. 23. There is a special ability to do a particularjob. These skills are developed throughspecialized training. Examples are:carpenter, plumber, electronics, and so on.
  24. 24. Those individuals with the highest level ofknowledge based education and managerialskills with a bachelor’s degree or diploma.Examples are: teachers, bank managers, and soon.
  25. 25. Level of education and training of worker:This makes it easy or difficult to train a person.a trained person is said to work faster.Working conditions: If conditions are ideal,layout of the work place (enough space). Areworkers comfortable abs able to get somethingto eat on the premises.
  26. 26. Motivation: Is there rewards such has a bonusthat workers will want to work harder for. Anincentive. Are employers motivating workers?Attitude to work: If persons are responsibleand show effort in the tasks given to them, thusincrease productivity.
  27. 27. Health of the workers: A health workerproduces more than an unhealthy worker.Good management: If managers place workersin areas that best suit their ability, then level ofproduction will increase, resulting thatproductivity will rise
  28. 28. This refers to the persons who are eitheremployed or seeking employment. It depends onthe number of workers available, hoursoffered, and wage paid.
  29. 29. Size of the population: Large populations aresaid to have a greater percentage ofsupply, than a small population would.Age distribution of the population: If thepopulation is too old (mostly retired or nearretirement), or too young (of school age)means that the labour force mat be small.
  30. 30. Too much women: If the population is mostlyof females who would have to stay home andlook after the children and maintain thehouse, then the supply of labour will reduce.Especially in countries where women are notallowed to work.
  31. 31. This refers to resources such as money andother assets that are necessary in the process ofproduction. Capital includes: buildings,machinery, stock, money, and so on. Things thatare needed in the day to day operation of thebusiness. Capital can be divided into physicalcapital and social capital.
  32. 32. Physical capital consists of:Fixed CapitalWorking CapitalFinancial Capital
  33. 33. This refers to capital that is long lastingand does not change in the course of production.They are repeatedly used in the operationprocess and the creation of wealth. Examples,buildings, machinery, tractors and so on.
  34. 34. This refers to capital that changes in thecourse of production. Things that are needed forthe day-to-day running of the business that areconstantly used up in the process. Examples, rawmaterials, cash, and so on.
  35. 35. This refers to money capital which thecompany uses to run its day-to-day operations. Itconsist of loan capital and share capital.
  36. 36. Other than private investments, there arepublic investments that takes the form ofgovernment expenditure on factories, plant,machinery, or on roads, airports, utility and soon.
  37. 37. Entrepreneurship is said to be the fourth(4th) factor of production. This refers to a personwho coordinates all the factors of production(land, labour, and capital) in order to producegoods and services. We can all agree that theother three (3) factors are important in theprocess of production, but without an
  38. 38. entrepreneur to organise these factors, productioncould can have been achieved or achieved moreefficiently. Entrepreneurs are said to be theowner of a business and it is their role to take onrisks of the business. Also to make decisions thatwill ensure that the business makes a profit.
  39. 39. To raise capital.To ensure that all the factors of production arebeing used correctly.To identify and clarify decisions related to thebusiness.To take risks by entering the market place.
  40. 40. To make any changes that are necessarytowards the growing of the business.To organize the different types of labourrequired.
  41. 41. There are different types of productivityactivities that are carries on in the region. Thereare known to be three (3) different types ofproduction.
  42. 42. Extractive or Primary ProductionManufacturing and Constructive or SecondaryProductionServices or Tertiary Production
  43. 43. This involves the extract of raw materialsfrom our surroundings or nature. The primarystage of production or goods in the raw state.Examples, agriculture, mining, quarrying and soon.
  44. 44. This is the secondary stage of productioninvolves the transformation of raw materials intofinished or semi-finished goods. Manufacturingis the state where primary goods are changed.Examples, bauxite into alumina, mining of oilinto gasoline, trees into wood and so on.
  45. 45. Constructive production is also known tobe secondary production, where manufacturinggoods are assembled. For examples, the buildingof houses, roads, and so on.
  46. 46. This is concerned with the provision ofservices (direct or indirect). This refers tocommercial services for goods and services toreach buyers. Examples, transportation, gasstations, and so on.
  47. 47. Primary Secondary TertiaryTrees Hood Building of housesAsphalt Road building Transportation (taxi)Cotton Clothing Sales at a storeAgriculture Processed food RestaurantsSugar cane Rum Sales at a barDiagram 2: Examples of the different typesof production, and how each are linked.
  48. 48. Goods are tangible commodities, whichsatisfy human needs and wants, while servicesare intangible things which satisfy human needsand wants has well, that are not visible to theeye, but can see their results.
  49. 49. These are industries that are connectedtogether, in that the finished products of oneindustry becomes the raw material or semi-finished goods of another industry. When oneindustry is dependent on another industry’soutput as an input to its own.
  50. 50. Linkage can either be backward orforward, and can involve an industry in primaryproduction linking with an industry in secondaryproduction.
  51. 51. This occurs when the demands on anindustry lead to the establishment of otherindustries to provide for the needs of thisindustry. The growth of an industry leads to thegrowth of the industries that supply inputs to it.
  52. 52. An example of a backward linkage industryis where the producer of baked goods find itnecessary to be in contract with an egg form forthe supply of eggs.
  53. 53. This occurs when the demands on an industryfinished goods depends on the needs of consumers.An industries finished goods becomes the raw goodsof another industry in order to satisfy customers.The growth of an industry leads to the growth ofother industries that uses its output as input.
  54. 54. An example of a forward linkage industryis where the producer of the baked goods sellshis finished goods to consumers through thedistribution channel process.
  55. 55. Egg Farm(Backward Linkage)Pastry Factory(Forward Linkage)SupermarketorRestaurantDiagram 3: Example of the linkage industrieswithin the economy.
  56. 56. Advantages Employment is created at alllevels. Local raw materials are put toefficient use. They can lead to valuableforeign exchange earnings. They promote regional co-operation and prosperity.Disadvantages Access to foreign markets isnot guaranteed. Availability of raw materialsin some cases are limited. Loans from multilaterallanding agencies are onlyprovided for infrastructuredevelopment.
  57. 57. Advantages The contribute to the skilledlabour pool in the country. Can encourage large scale ofproduction and may meetthe domestic as well asexport demand.Disadvantages Heavy machinery isexpensive to buy and set up. Shortage of venture capitalto extract raw material, startmanufacturing and carry outsuccessful export marketing.
  58. 58. Website links for further reading