Open In App

Means and Function of Production

Improve
Improve
Like Article
Like
Save
Share
Report

In all competitive exams, the general studies section is a nightmare for all aspirants. Economics is one of the sub-topic of general studies. Here we will discuss “Means and Function of Production”. This article will surely help one to understand the concept and give one an edge over other aspirants.

Means and Function of Production :

Production is the economic activity through which individual and household consumable goods and services are produced. In the course of economic activities, keeping in view the present and future needs of goods and services through productive units, the work of increasing social capacity is also done.

These business institutions are major components of the economic system. These mock entities have been created by individuals or households to organize and facilitate production. The actual characteristic of a business firm is that it purchases factors of production such as land, labour, capital, intermediate goods, and raw materials from households and other business firms, etc. By converting these resources into various goods or services the business firm sells them to customers, other business firms, and various units of the government as well as abroad.
 

Definition :

According to Bates and Parkinson:

“Production is the organized activity of transforming resources into finished products in the form of goods and services; the objective of production is to satisfy the demand for such transformed resources”.

According to J. R. Hicks:

“Production is any activity directed to the satisfaction of other peoples’ wants through an exchange”. 

According to the above definition, in economics, we do not treat the mere making of things as production. What is produced must be designed to satisfy the consumer.

What production does not include :

All the work done to fulfill the needs of customers is a part of the production. People who provide services like carpenters, solicitors, bus drivers, postmen, and clerks are a part of the process of being satisfied as farmers, miners, factory workers, and bakers. The measure of the productiveness of a work is whether someone will buy its final product or not. If we buy something, we need it; If we are not willing to buy it, then economically we don’t want it.
 

Types of Production

There are three types of productions –

1. Primary Production:

Primary production is carried out by ‘extractive’ industries like agriculture, forestry, fishing, mining, and oil extraction.

2. Secondary Production:

This includes production in the manufacturing industry, viz., converting intermediate and final goods from raw materials and semi-finished goods — conversion of wheat into flour or bauxite into aluminium sheets. They are generally described as manufacturing and construction industries, such as the manufacture of vehicles, furnishing, clothing, and chemicals, as also engineering and building.

3. Tertiary Production:

The tertiary sector is involved in the production of all those services which convert the finished goods to be put in the hands of the consumer. These services are supplied to firms in all types of industries and directly to consumers. Examples cover distributor traders, banking & insurance, transport and communications. It also includes services provided by the Government such as administration, education, health, security, etc.

Output :

Any activity connected with the exchange of money is called economic activity. Production is an essential component of economic activity. It results in the production (manufacture) of a large variety of economic goods and services.

Factors of Production

Modern economists express the factors that determine production as a production function. It is a technological relationship between inputs produced and output used, i.e.
O = f (L, C, A, E)
O → Output produced
f→ Function
L→ Labour
C →Capital
A→ Land
E→ Entrepreneur

Land :

According to Alfred Marshall, ‘Land means those materials and forces which nature gives freely in the form of air and light and heat, in land and water, to aid man.
The land that is used in the production of goods and services is very important from the point of view of economics. Through this man gets almost all natural and artificial resources.

The main characteristics of the land are :

(i) it is a natural gift;
(ii) it is available in limited form;
(iii) it is versatile; And
(iv) It is subject to the operation of the law of diminishing consideration.
Therefore, the land is a fundamental means of production. Thus, rent is earned from the land.

Labour :

It is the primary and most important factor of production, without which production cannot be done. Labour employment directly solves the problem of unemployment. Usually, in daily parlance labour and worker are used interchangeably. However, in economics, the worker is a person and labour is his service. Hence, labour can be defined as the mental and physical effort put in by a worker.

According to Alfred Marshall, “any effort of body or mind with anything other than the pleasure derived from labour is done wholly or in part.”

Labour is quite different from other factors of production because it is a living factor, which is the most important part of sustenance.

The characteristics of labour are as given below :

(i) Labour means human exertion.
(ii) Labour cannot be separate from the labourer.
(iii) Co-existence  of labour-power,
(iv) Labour is destructive,
(v) Labour has less bargaining power,
(vi) Labour is a mobile factor of production.
(vii) Labour is both the means of production and the end to it.
(viii) Different workers have different efficiency and can be scaled up according to their capacity
Therefore, labour plays an important role in production.

Capital :

J.S. Mill defines capital as the accumulated product of past labour destined for the production of wealth.”

The characteristics of capital are :

(i) Capital is the result of labour work.
(ii) Productive is the feature of capital.
(iii) Prospective is the feature of capital.
(iv) Non-permanency is the feature of capital.
(v) Mobility is a feature of capital.
(vi) Passiveness is the feature of capital.

So, Boost of the production and labour is the basic factor of capital.

Entrepreneur :

It is also termed as an organizer. As per Benham, Organization is all about directing, deciding and designing the forms of business. The entrepreneur sets up a production unit to produce goods and services. He organizes the production process by hiring workers, renting, land and borrowing capital. This means one who plans, organizes, and manages a business enterprise is an entrepreneur. He must be far-sighted and have the skill and qualities of leadership. He should be experienced and seasoned. He must be a good administrator having perfect knowledge of the psychology of workers and the market.

The characteristics of an entrepreneur are :

(i) Production is planned by the entrepreneur.
(ii) Production is organized by the entrepreneur.
(iii) Production is managed by the entrepreneur.
(iv) All the risks and uncertainties of production are borne by the entrepreneur.
(v) He must have creative ideas.
Thus, an entrepreneur is the chief architect of production.
 


Last Updated : 20 Aug, 2023
Like Article
Save Article
Previous
Next
Share your thoughts in the comments
Similar Reads