Production In Commerce: Meaning Of Production, Stages/Types And Importance Of Production

Commerce

Topic: Production

Table Of Contents

  • Meaning Of Production
  • Groups Of People Involves In Production
  • Stages/Types Of Production
  • Importance Of Production In Commerce

Meaning Of Production

This is the transformation of raw material into finished goods and their distribution to the customers to satisfy their wants.

This is also the creation of goods and services to satisfy human wants, it is the act of making goods and services available to the public that’s creation of utility. It is all the economics activities aimed at the creation of goods and services and their distribution of these to the final consumer for the satisfaction of human wants.

All goods and services produce must posses utility, that is the most important thing and capable of satisfying certain human wants.

Also production is the creation of utility. production is complete when the goods and services get to the final consumer or user. In production three groups of people are involve, namely:

a. Producer
b. Distributor
c. Consumer

Stages/Types Of Production

There are two stages in production, they are:

(a) Direct Production:

This is the type of production in which an individual produce goods and services only for family uses or consumption. They product are not for sale. It is usually very small in size and family labour is usually employed.

b. Indirect Production:

This is the type of production in which goods and services are produced in large scale mainly for sales or exchange for other needs. This involves th use of modern equipment and skilled labour to be able to make surplus goods and services that the producer would exchange to get money which he will use to satisfy other wants. It is not possible for a single producer to satisfy all his wants without depending on others for exchange of goods and services.

Indirect Production is sub-divided into three major group to the Primary, Secondary and Tertiary Production.

i. Primary Production: This refers to the extraction of raw materials by nature. It is concerned with the process of obtaining raw materials or resources in their natural form from the land, air and water. It forms the basis for further production. Examples of Primary Production include agriculture, mining, fishing etc.

ii. Secondary Production: This involves the transformation or conversion of basic raw materials (semi finished goods) into final forms that are acceptable to the consumers.

This involves all forms of manufacturing and construction. They transformed raw material from extractive sector into finished products, Example; Processes food, houses, clothes e.t.c, It involves trade and Aid to Trade.

iii. Tertiary Production: This involved the provision of commercial and professional services to the people. The goods produced by primary and secondary production levels are distributed to the people for consumption.

Those involve here are people in retailer, transporters etc and also those that render professional services like solders, policemen, doctors, lawyers, musicians, teacher etc.

Importance Of Production

Here are the importance of production in business and in economic development:

1. Availability of goods and services.

2. Improvement of employment.

3. Improvement in standard of living.

4. Increase in wealth of people.

5. Increase in export potential.

6. Acquisition of skills: The engagement of people in production leads them to acquire special skills.

The goods produced by primary and secondary production levels are distributed to the people for consumption.

Those involve here are people in retailer, transporters etc and also those that render professional services like solders, policemen, doctors, lawyers, musicians, teacher etc.

Importance Of Production

Here are the importance of production in business and in economic development:

1. Availability of goods and services.

2. Improvement of employment.

3. Improvement in standard of living.

4. Increase in wealth of people.

5. Increase in export potential.

6. Acquisition of skills: The engagement of people in production leads them to acquire special skills.