It’s the creation of goods or provision of services to satisfy human wants
It involves activities of transforming of materials into finished goods, transportation and storage
Utility
Utility_-is the ability of a good or services to satisfy human wants.
Types of utility
Form utility –this is changing the form of a commodity by converting raw materials to finished goods .e.g. sugarcane may be converted into sugar
Time Utility-this is created when a good is stored until it is appropriate time to use it. Example, storing food stuff in the school store during the holiday to use when the school opens.
Place Utility– this is bridging the geographical gap between the producer of commodity and its consumers through transportation. Example, transporting books from a bookshop to the school
Possessive Utility-this refers to the transfer of ownership of good and services from one person to another it maybe done through trade. Example, ownership of bread may be transferred from a canteen owner to a consumer when the customer buys it.
Types of production
Direct and Indirect Production
Direct production (subsistence production)
Is type of production from ones own personal consumption
Characteristics of Direct Production
- Goods and services are of low quality and quantity
- Leads to low standards of living.
- Encourages individualism
- Can very tiring
- Does not encourage invention and innovation
- No one has the ability to provide all that he/she requires
- b) Indirect production
Production of goods and services for sale
Characteristics of Indirect Production
- Lead high quality and quantity goods.
- Production with a view of exchange.
- It results in surplus production of goods and services
Level of Production and Related Occupation
Primary Level
- This level is also called extractive level, involves extraction of goods from their natural setting.
- The products can be used in the state they are or can be processed to make them more useful. example water, mining, fishing. Lumbering e.t.c
Secondary Level
- Involves transformation of raw materials into finished products or more useful products including; manufacturing e.g. food processing, Construction e.g. house and roads
Tertiary Level
- Involves provision of services. Divided into commercial and direct
Commercial services
Activities either trade or consist trade to take place e.g wholeselling,retailing,banking .
Direct Personal Service
Service rendered by individual direct to the consumer e.g nursing teaching and legal service.
Factors of Products and Their Rewards
Are resources/agents required in production e.g
- L and
- Labour
- Capital
- Entrepreneurship
Land
- Natural resource e.g. minerals, soils etc
- They are all the natural resources below or above the earth surface.
- The rewards are rent, rate or royalty
Characteristics of Land as a Factor of Production
- It is a basic factor of production, that is, production can’t take place without it.
- Its supply is fixed that is, we cannot add more earth service on to what nature has provided.
- It lacks geographical mobility i.e it cannot be moved from one geographical to another.
- Quality is not homogeneous .Productivity of one piece of land will have different levels of fertility, mineral deposits, soil textures and varying climate conditions
- Productivity of land can be increased by increasing quality and quantity of capital
- It’s subject to the law of diminishing return.
- It’s a natural resource
Labour
- Human efforts are applied in production either physical or mental
- Not all human effort is labour. For it to become labour it must be aimed at production and be paid for.
- Rewards are wages and salary.
- Labour may be skilled, semi skilled or unskilled. Which is determined by the lvel of education, training and experience
Capital
- Refers to all the artificial resources used in the production of goods and services
- There are two types of capital namely fixed and operating /circulating capital
- Fixed capital are things that stay in a business almost permanently e.g. machinery, buildings, vehicle, furniture etc
- Working/circulating capital gets used up every time its applied in the production process e.g. raw material and money.
- Capital is rewarded in form of interest
Entrepreneur
- This is an individual who identifies a business opportunity, devotes the factors of production and starts a business venture which may involve the creation of goods and service
- The entrepreneur pays for the services of all the other factors of production
- He makes important decisions in business e.g s/he decides what to produce or sell, how much to produce or sell and what methods to apply in the production process.
- The reward for entrepreneur is profit
Division of labour and specialization
Division of labour
- This occurs when the production process is split into many stages or operations
- Each stage involves a special task performed by one or group of workers. For example, in clothe making factory, the production process is organized in such a way that each worker performs anly a small part of the whole operation. Some cut the cloth material, others join or sew them together, others fixing buttons etc
Specialization
- This occurs when one worker performs certain specific tasks of a job
- It ensures that workers concentrate on doing those jobs which they are best suited in terms of skills, qualification and experience
Advantages of division of labour and specialization
- Workers skills are enhanced because of performing repetitive tasks, resulting in creation of experts.
- Workers suffer less fatigue as they concentrate on doing one task in one place
- New talents and inventions are developed as workers perform repetitive tasks hence one can detect and correct weaknesses in the techniques used
- Work is done at a faster rate due to repetitive nature of tasks and reduced movement of workers from one station to another
- Goods and services produced are usually of high quality since skills of workers are matched with tasks
- Use of machines is made possible leading to standardization of products and lower production cost, which in turn leads to higher profits
- Overall output increases because work is done at faster rate
- Planning and management of workers becomes easy which increases efficiency in organization
Disadvantages of division of labour and specialization
- Workers may suffer from boredom due to monotony of doing the same thing repeatedly
- Individual workers cannot identify themselves in the final products since workers perform only small part of the whole process
- Incase of loss of jobs, such workers find it difficult to get new jobs because they are specialized in a particular field only.
- Leads to interdependence between countries, businesses or individuals which may lead to shortage of goods and services especially in times of conflict or natural calamities
- Use of machines may reduce employment opportunities by replacing manual labour.
- Workers eventually lose skills owing to the over-dependence on machines
- Due to specialization, problem at one stage can disrupt the whole production process.
Mobility of factors of production
- This is the movement or the transfer of a factor of production from one geographical area to another o form one occupation to another
- Horizontal mobility is the movement from one office to another in the same capacity
- Vertical mobility is the movement from one grade to another in the same occupation
- Land lacks geographical mobility but highly occupationally mobile
- Capital – fixed capital lacks geographical mobility and occupational mobility. Equipments, tools and money may be geographically and occupationally mobile
- Labour – it’s the most highly mobile factor of production whether geographically, occupationally, horizontally or even vertically.
Factors hindering mobility of labour
- Natural talent and ability differ from one individual to another
- Training involved d for one to acquire skills in new occupations can be lengthy and expensive
- Some organizations have strict regulations barring new entrants from joining these professions e.g. law, medicine and architecture
- Some jobs though not well rewarding have better terms of service and pension schemes
- Adverse climatic conditions cause discomfort and disease discourage people from changing geographical locations
- Ignorance by workers on available job opportunities
- Geographical transfer involves transport costs, changing residence and school of ones children
- Security and political stability of given region
- Social ties that bind one to his/her community
- Language rules on immigrations
