The Concept of Production

The aim of any economic activity is to produce goods and to provide services. Production is therefore the transformation of the input into the output, by means of different productive processes.

To produce any article or to provide any service depends upon some factors or agents of production, also called factor resources. There are two broad types of factors of production: human factors and non-lie man factors. The human factors consist of lab our and enterprise, and the non-human factors refer to land and capital.

Lab our describes the productive services that is to say the human physical efforts, skills and intellectual abilities.

Enterprise refers to the way in which the structural organization of production is made.

Land denotes the natural resources of the universe, such as: the earth, the sun, lakes, rivers, animals, etc...

Capital consists mainly of finance and other resources, such as factories, means of production, roads, etc.

As far as production is concerned, we distinguish two kinds: direct production and indirect production. The former implies that the worker produces for his own needs, whereas the latter refers to a chain of production processes. This chain can be divided into three major processes:

Primary process deals with the extraction of raw materials, e.g. mining.

Secondary process, in this process, the raw materials are transformed into manufactured goods, e.g. car manufacturing.

Tertiary process, in which the finished article is made available and displayed to the consumer.