Question

What is the meaning of Production? What is the process of Production? Illustrate. 

Answer 1

Meaning of Production in Economics - - - - - - - - - - -

 

In economics a change in anything which adds or creates utility was called a production.

Professor J.R. Hicks has defined production as follows:

" Production may be defined as any activity, whether physical or mental, which is directed to the satisfaction of other people's wants through exchange."

In the modern context production is related to value creation and it may be defined as follows:

" Production is the process of transformation which leads to creation or addition of value in a good or a factor. "

The production process can be shown as follows:

 

          PRODUCTION PROCESS 

Input =>Transformation => Output

 

Thus we can see that, production process is the process of transformation, where inputs are transformed into outputs so that the value of output is greater than the value of inputs.

Since production is transformation, it can be done through the following changes.

 

1.  Change of Shape - - - - - - -

If the shape of a thing or a commodity is changed in such a manner so that its value increases, then this process will be called a production process. For example,

A log of timber is converted into a piece of furniture. The value of furniture will naturally be greater than the value of the log and, therefore, this activity of furniture making will be called a production activity.

 

2.  Change of Former or Appearance - - - - - - - - -

If there is no change of shape but form or appearance of that product is changed, so that its value increases, this activity will also be called a production activity. For example, 

Polishing or painting a piece of furniture, changing the colour of a product or any other process by which a product becomes more attractive and its value increases. All these processes or activities will be termed as production activities.

 

3.  Change of Place - - - - - - -

If anything is transported from a place, where its price is low, to another place, where its price is high, then this change of place shall be called a production process. For example,

Salt is transported from sea shore to a distant city, so that its price will increase or coal is transported from the coal mine to its place of consumption will be termed as a production activity.

 

4.  Change of Time - - - - - - -

Change of time can also add to the value of product. For example,

When the crop is harvested its price is low and if it is brought to the market after few months, it can fetch a higher price, then this act of storing will also be a production activity. Therefor, cold storage or warehousing industries should be treated as production activities.

 

5.  Other Methods - - - - - - -

If some facility is given to consumers so that the value of a product is increased, then this will also be a production activity. For example,

Purchasing goods in bulk from a wholesale market and selling it in small quantities to retail customers or suitably packing goods to suit consumer needs, or any other method through which, the value of product can be increased will be termed as production activities.

 

In economics a change in anything which adds a creates utility was called a production.