Production refers to the transformation of raw materials into finished goods.

It is the systematic process of combining various materials (land, capital) and immaterial inputs (technical know hour) to create goods and services for human consumption.

In other words, production can be defined as the use of scarce and limited resources to create goods and services which have value.

The purpose of production is to create utility. That is, production seeks to create goods and services that satisfy consumer wants.

Types of Production 

For our purpose, we will categorize production into three: Primary production, secondary production and tertiary production

1. Primary production: This is concerned with getting resources from their natural environment. 

Primary production involves extracting resources so that they can be converted into a form usable by human beings.

When a fisherman catches a fish, for example, he is engaging in primary production because fishing entails collecting fish from their natural habitats.

Mining, quarrying, lumbering, farming, and forestry are all examples of primary production.

Resources extracted in primary production are generally in an unusable state, so they need to be converted into a form usable through secondary production.

2. Secondary production: Secondary production entails transforming resources obtained from primary production into a form that can be used by end consumers.

In other words, secondary production involves transforming raw materials into finished or semi-finished goods.

It involves converting goods into a form usable by the user so that they can be transported to the end-user through tertiary production.

Secondary production includes carpentry, bag making, shoe making, factory workers etc

3. Tertiary production: This entails providing direct and indirect services aimed at ensuring that goods reach their final destination

Tertiary production is concerned with getting goods produced to the final consumers.

Driving, warehousing, insurance, teaching, and communicating are all part of tertiary production.

Importance of production

1. Production creates utility: Utility is the ability of goods or services to satisfy human wants.

Production is referred to as the creation of utility because it involves creating goods and services that satisfy a particular human wants.

2. Production makes goods and services available: Goods and services are created through production and the availability of goods and services depends on the creation of goods and services.

If a good is not produced, goods will be scarce in the market, which will increase the price.

3. Production creates employment: Production requires various activities, which necessitate the employment of people.

To make bottled water, for example, a large number of people must be employed to ensure that the job is done effectively.

4. Increases the standard of living of citizens: By creating employment, production increases the standard of living of citizens of a country.

Production also increases the standard of living of citizens by making available goods for their consumption

Factors of production

Factors of production refer to resources which are combined to produce goods and services

There are four factors of production, namely: land, labour, capital and entrepreneur.

1. Land: This consists of the physical surface of the earth on which productive activity takes place.

All resources above, beneath, and on the earth are included in the definition of land


2. Labour: This refers to all human exertion put into the production of goods and services.

It includes all physical and mental efforts expended in the production of goods and services.


3. Capital: All manmade resources used in the production of goods and services are called capital.

Money isn't the only thing that counts as capital. Capital also includes equipment and machinery utilized in the production of goods and services.

4. Entrepreneur: This is the factor of production that coordinates the activities of other factors of production.

An entrepreneur, like labour, is a human factor motivated by the desire to earn profit.

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