SS1 Commerce Lesson Note on Production

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TOPIC: PRODUCTION

CONTENT:

(i) Meaning of Production

(ii) Classification of Production

SUB-TOPIC 1: MEANING OF PRODUCTION AND CLASSIFICATION PRODUCTION

The term production refers to the creation of goods and services to satisfy human wants. Production also means the transformation of raw materials into finished goods and their distribution to the consumer to satisfy human wants. It can also be referred to as the creation of utility. Production is not complete until the goods and services get to the final consumer. All goods and services must possess utility, which that they must be capable of satisfying certain human wants.

SUB TOPIC 2: CLASSIFICATION OF PRODUCTION

STAGES OR TYPES OF PRODUCTION

Production is grouped into two major categories. These are direct and indirect production.

(a) Meaning of Direct Production

Direct Production is the type of production in which an individual produces goods and services only for the family use or consumption. The goods produced are not for sale and usually family labour is employed in the production process. Direct production is in small scale.

(b) Meaning of Indirect Production

Indirect Production is the type of production in which goods and services are produced in large scale mainly for sale or exchange for other needs. This type of production involves the use of modern equipment and skilled labour to be able to make surplus goods and services.

Indirect production is subdivided into three major groups. These are primary, secondary, and tertiary production.

1. Primary production (industry): Primary production refers to the extraction of raw materials provided by nature. Primary production forms the basis for further production. Examples of primary production include agriculture, mining, fishing lumbering etc.
2. Secondary Production (commerce): Secondary production involves the transformation or conversion of basic raw material or semi-finished goods into final forms that are acceptable to the consumer. Secondary production embraces all forms of manufacturing and construction. The raw materials from the extractive sector are transformed into finished products such as cars, food, roads, houses etc.
3. Tertiary production (services): Tertiary production is concerned with the provision of commercial and professional services to people. The goods produced at the primary and secondary production levels are distributed to the people for consumption. People involved in this aspect of production include those in commercial services like wholesalers, retailers, transporters etc as well as professional services like soldiers, bankers, doctors, hairdressers, teachers, lawyers etc.

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