Production Analysis


“Production is any activity diverted to the satisfaction of other people’s wants through exchange”.
– J R Hicks


Production is a process of using various
material and immaterial inputs in order to make output for consumption. Production
process creates economic well-being.The satisfaction of needs originates from the output. Production is the result of cooperation of four factors of production
(land, labour, capital and organisation). In Economics, production refers to the creation or addition of value. It simply transforms the inputs into output.Production may be at varying levels. The scale of production
influence the cost of production. All
manufacturers are aware that when
production of a commodity takes place on a larger scale, the average cost of its production is low. This is the reason why the entrepreneurs are interested in enlarging the scale of production of their commodities. They stand to benefit from the resulting economies of scale. There is also the possibility of making their products available in the market at lower prices.

Features of the Factors of Production:

Factors of production means resources
used in the process of production of commodities. There are of four types viz.,
land, labour, capital and organization or
enterprise. Here, land represents natural
resources (such as soil, mineral deposits,seas, rivers, natural forests, fisheries etc).Labour represents human resources.Together, these two factors are called the ‘primary factors of production’.These two factors produce some units of goods for the purpose of consumption. And as Consumption of these goods takes place, there is the possibility of some of these goods getting left over. Thus, saving is production minus consumption. This saved amount is called as capital, which serves as investment in the production process. Also, organisation or enterprise is a special form of labour. The third and the fourth factors are called ‘secondary factors of production’. These four factors depend on each other. They have a coordinated impact on production of goods and services.

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