AKINWOLE AYODEJI OLATUNBOSUN

EU200203-2364
ECN 403
ADVANCED MACROECONOMICS
DR OLABISI.O
ASSIGNMENT

QUESTION
Define production and all it's ramifications?

DEFINITION OF PRODUCTION
In simple words, the definition of production is the process in which various
inputs, such as land, labor, and capital, are used to produce the outputs in the
form of products or services. Each company is diverse and has a particular
production strategy, but all businesses strive to combine their inputs in a way
that maximizes their profits.

Businesses must take into account several factors when deciding how much to produce
to be profitable. Businesses must consider the cost of the inputs utilized in the
production process.
Similarly, firms must also monitor the technology they use for production. Firms
might either use labor-intensive factories or capital-intensive factories,
depending on which one helps them maximize their profit.
The area in which firms operate helps them to determine which production decision
will be beneficial for them. Labor-intensive factories are mostly used in countries
with low wages. Likewise, capital-intensive modern factories are used when a high
number of laborers is not required or when a firm operates in a country where there
are high wages.
IMPORTANCE OF PRODUCTION
What is the importance of production? Production is a crucial component of
economics and is essential for any economy to function. Companies use a variety of
inputs, such as land, labor, and capital, to create goods or services that are
later used by customers. In addition to maximizing the use of resources, production
also generates employment opportunities. Lastly, economic efficiency can be
attained if the products and services created are delivered to the right customers.

EXAMPLE OF PRODUCTION
Let's take a look at an example of production to comprehend the concept in a bit
more detail.
For example,
Let us suppose that you are the owner of a packaged food manufacturing firm and
want to expand your business in a country where the labor wages are low. The most
sensible course of action you can take to maximize your profit is to use a labor-
intensive factory. As the minimum wages in the area you will operate in are low,
doing so would cut costs for the company.
Likewise, you again want to expand your business, but this time to a country with
high labor wages. In such a situation, the capital-intensive factory should be
used. To further maximize your profit, you can choose a supplier who supplies raw
materials at low prices.

TYPES OF PRODUCTION
Now that we know about production let's learn about the types of production. There
are three types of production - primary production, secondary production, and
tertiary production.

Primary Production
The stage of production where raw materials are produced for the industries is
known as primary production. The materials produced in the process of primary
production are later utilized by secondary industries in their production process.

Secondary Production
Secondary production is the process in which raw materials are converted into
finished goods. The secondary industry-produced goods are further utilized by
tertiary industries.

Tertiary Production
Tertiary production is the process in which industries involved sell the finished
goods produced by secondary industries.

FACTORS OF PRODUCTION
Factors of production are the tangible and intangible resources that are used by
the firm to produce goods and services. A firm's efficiency is measured by looking
at how the firm utilizes its factors of production. There are four factors of
production, and proper utilization of each of them is significant to a company's
continued growth.
There are four major factors of production namely;
Land, Labour, Capital and Entrepreneurship.

The land is the tangible natural resource that the company uses to make its
products. The term 'land' does not only correspond to the land area but represents
the overall natural resources, such as rivers, and forests, which are used by
businesses. For this reason, the land is also referred to as a natural factor of
production.

Laborers are humans who employ both their physical and mental capabilities to
contribute to the process of producing a product or a service. Labor is otherwise
known as the human factor of production.
Additionally, any business needs a factory or different equipment to operate.
Capital refers to these artificial resources that are utilized in the production
process.

Lastly, an entrepreneur is someone who combines all of the resources - land, labor,
and capital to produce a product or service. Entrepreneurs make decisions regarding
the production process and the best way to utilize the factors of production.

In summary,
Production refers to the process of creating goods or services. It involves various
activities like manufacturing, assembling, and packaging. Ramifications of
production include economic growth, employment opportunities etc.