This document discusses consumers and producers. It defines consumers as individuals who consume goods and services to maximize satisfaction within their limited incomes. Producers are defined as individuals who produce goods and services using factors of production like land, labor, capital and entrepreneurship. The document outlines the importance of both consumers and producers. Consumers encourage demand and create demand for various products and services. Producers supply goods and services, act as entrepreneurs, utilize resources optimally, promote exports, increase income and employment, and increase demand for factors of production.

1. THE DECISION OF
CONSUMER AND
PRODUCERS
MR.AHMED ABDIRASHID
FARAH
6/3/2019
1

2. CONSUMERS
6/3/2019
2
 Consumers are the basic economic entities of an
economy. All the consumers consume goods and
services directly and indirectly to maximize
satisfaction and utility.
 Consumers have limited income and by which they
want to satisfy their maximum utility (utility is the
want satisfying capacity of a commodity).
 Generally, consumer means an individual only;
however, consumers will consist of a particular
individual, a group of individuals, institutions etc.

3. Conti…
6/3/2019
3
 (i) Direct Consumers:
 History tells us that at the very early stage of
civilization producers produced all the basic needs
of life for themselves and their families. All the
basic needs like food, clothing and shelter they
produced for their own and their family’s
consumption. Hence, the producers were producing
goods for their self- consumption. Thus, they were
called as direct consumers or direct producers also.

4. Conti…
6/3/2019
4
 (ii) Consumers by Exchanging Products:
 With passage of time and civilization people
understood the benefits of exchange. Hence, they
tried to specialize on a particular or few products
and then tried to exchange the product with the
other products. The exchange started with barter
system and now continuing with monetary system.

5. Conti…
6/3/2019
5
 This will create the concept of marketable surplus,
i.e., the producers are not only producing goods for
self-consumption, but some excess or surplus
products they are keeping to get other products in
exchange. For example, a farmer producing pulse
not only for self-consumption but the extra or
surplus pulse he will exchange with the producer of
other product.

6. Conti…
6/3/2019
6
 (iii) Modern Consumers:
 These consumers only go to the market to buy the
goods and services available in the market through
money only. Here, the producers are also producing
goods or services directly sent to the market for the
consumers. These consumers buy all the goods and
services in lieu of money. The modern consumers
are the outcome of monetary system.

7. IMPORTANCE (SIGNIFICANCE)
OF CONSUMERS:
6/3/2019
7
 (I) Encourage Demand:
 Consumers are the main source of demand for all
the goods. The producers of industrial goods or the
producers of agricultural products are all producing
the various items according to the demand in the
market. According to Prof. Marshall, it is the
demand which controls the production or market.

8. Conti…
6/3/2019
8
 Hence, the consumers create demand in the market
and producers produce goods or services
accordingly.

9. Conti…
6/3/2019
9
 (ii) Create Demand for Various Products:
 The different consumers have different types of
demand or a single consumer can also demand
different types of products. These will encourage
the producers to produce various types of products
in the market. For example, some consumers want
to consume paddy, whereas some consumers want
to consume wheat.

10. Conti…
6/3/2019
10
 However, there are some consumers; who want
different qualities of paddy and wheat also. Thus,
there are some consumers who prefer red colour
soap whereas other’ consumers prefer green colour
soap. Therefore, to satisfy all the types of
consumers, producers must increase the production
of various products.

11. Conti…
6/3/2019
11
 (iii) Increase Demand for Consumer Goods:
 Consumers create more demand for all the types of
consumer goods, like durable, semi- durable and
perishable goods. Durable consumer goods include
furniture, televisions, etc. and for semi-durable goods
like clothes, books, shoes etc. On the other hand,
perishable goods like bread, butter, vegetables, fruits
etc. are all demanded by the consumers for their
consumption purposes. Naturally, all these create an
atmosphere to increase demand for consumer goods.

12. Conti…
6/3/2019
12
 (iv) Enhance Service Diversification:
 Consumers not only consume different varieties of
goods, but also consume large varieties of services
to maintain the standard of living. These include
health service, educational service, banking and
insurance service, transport and communication
service, etc. Day by day the consumption of these
services is rising. This will lead to expansion or
enhancement of service sector within the econom

13. PRODUCERS
6/3/2019
13
 Producers:
 Producers are the group of persons who produce
either goods or services for creating utility.
 They usually produce with the help of factors of
production

14. CONTI…
6/3/2019
14
 FACTOR PRODUCTION
1. Land
2. labor
3. Capital
4. Entrepreneurship

15. TYPES (KINDS) OF
PRODUCERS:
6/3/2019
15
 Producers are of following types:
 (I) Agricultural (Primary) Producers:
 These producers mainly produce goods related to
agriculture and its allied activities. They generally
produce food crops, vegetables, fruits, flowers and
forest products. Moreover, they also concentrate on
fishing, animal husbandry, cattle rearing and other
agro-based products like poultry farming,
mushroom production etc. These primary producers
mainly use natural resources to produce goods.

16. CONTI…
6/3/2019
16
 ii) Industrial (Secondary) Producers:
 These producers mainly produce goods related to
industry or manufacturing units. These producers
are engaged in large-scale, small- scale and tiny
scale industrial units. They produce various types
of finished goods for several manufacturing units.

17. CONTI…
6/3/2019
17
 Examples of secondary industry divisions include
automobile manufacturing, steel production and
telecommunications. Also called secondary sector
of industry.

18. CONTI…
6/3/2019
18
 (iii) Service (Tertiary) Producers:
 To produce both agricultural and industrial goods
various types of services are required. These
services include transport and communication
services, banking and insurance services, storage
services, etc. The producers who produce all these
services are called service (tertiary) producers.

19. IMPORTANCE (SIGNIFICANCE)
OF PRODUCERS:
6/3/2019
19
 (i) Supply of Different Goods and Services:
 Supply comes from the producer side. The
producers or firms supply various goods and
services in the market according to the demand of
the consumers. Hence, if the number of producer
increases, then the total supply of goods and
services will also increase.

20. CONTI…
6/3/2019
20
 (ii) Entrepreneurship:
 Producers are also entrepreneurs. They are the main
coordinators of all the factors of production like
land, labour, capital etc. They usually take the
responsibilities to allocate the factors of production
for conducting smooth business activities.

21. CONTI…
6/3/2019
21
 (iii) Optimal Use of Resources:
 Producers are the leading persons, who take the
initiatives to utilize all the economic resources, like
forest resource, land resource, mineral resource,
water resource, human or labour resource etc.
optimally or efficiently for the production
activities. The optimal use of these resources helps
the country to achieve the path of economic
development.

22. CONTI…
6/3/2019
22
 (iv) Export Promotion:
 The producers of export-oriented goods and
services help to reduce the balance of payment
deficit of the country by promoting more exports.
These producers mainly produce goods services
and for export and thus foreign exchange reserve
will increase automatically.

23. CONTI…
6/3/2019
23
 (v) Increase in Income and Employment:
 Producers by increasing production from small
scale to large scale increase the income and
employment of the society as well as the country.
Not only that, more number of industries will
flourish along with the rise in income and
employment opportunities.

24. CONTI…
6/3/2019
24
 (vi) Rise in Demand for Factors of Production:
 Producer by creating demand of their product in the
market indirectly create derived demand. Thus,
with the increase in the demand of a particular
product, the factors of production, i.e., land, labour,
capital etc. responsible for the production of that
product’s demand will also increase automatically

25. 6/3/2019
25
END