Production – SS1 Commerce Lesson Note (First Term)

Production is the changing of raw materials into finished goods and the distribution and provision of goods and services to satisfy human wants. Production is also referred to as the creation of utility. Utility is the ability of any commodity or service to satisfy human wants.

Behavioural objectives

By the end of the lesson, students should be able to:

• define production and utility;
• distinguish between capital goods and consumer goods;
• describe primary, secondary and tertiary production, with examples;
• name the four factors of production and the reward for each;
• state the functions of the entrepreneur;
• explain the process of production.

What are the types of goods?

1. Capital goods (producer goods): These are goods which are used for further production of goods and services, e.g. raw materials, machines, trucks etc.
2. Consumer goods: These are goods and services which are ready for use by the final consumer, e.g. bread, milk, services of a teacher etc.

How is production classified?

1. Primary production: This involves the extraction of raw materials from the soil or sea, e.g. mining, farming, fishing etc.
2. Secondary production: This entails the conversion of raw materials into finished or semi-finished products, e.g. manufacturing of cars, fans, clothes, chemicals etc.
3. Tertiary production: This is the stage where the goods and services made available at the above two stages are taken to those who need them. It includes the activities of those who help to bring finished goods to the consumers, e.g. transport, communication, insurance, banking etc.

What are the factors of production?

The factors of production are the resources that are combined for production to take place. They are:

1. Land: This refers to the resources provided free by nature, e.g. soil, sunshine, rain, minerals, forest, fishing grounds etc. The reward for land as a factor of production is rent.
2. Labour: Labour is the physical and mental efforts of man directed to the production process. Labour may be unskilled, semi-skilled or skilled. The reward for labour is wages.
3. Capital: This is the resources or wealth made by man that is used for producing further wealth, e.g. machinery, motor vehicles, cash etc. The reward for capital is interest.
4. Entrepreneur: This is the factor that organises or co-ordinates other factors of production for more productive purposes. The reward for entrepreneurship is profit.

What are the functions of the entrepreneur?

1. Risk bearing
2. Making decisions relating to the business
3. Co-ordination of other factors of production
4. Provision of capital
5. Initiating the business
6. Organisation of research

What is the process of production?

The process of production is the series of activities and stages involved in the creation of goods and services, as well as getting them to the final consumer who will use them. Production is said to be complete when the goods and services produced reach the final user or consumer.

Therefore, the production process includes the stages or activities of those who aid production and trade, e.g. transport, warehousing etc.

Evaluation

1. Define production and utility.
2. Distinguish between capital goods and consumer goods, giving one example of each.
3. Name the three classes of production and give one example of each.
4. List the four factors of production and state the reward for each.
5. State four functions of the entrepreneur.

Assignment

1. What is production?
2. Explain the different activities involved in industrial, commercial and service occupations.
3. State five factors that have contributed to the growth of Commerce.
4. Illustrate with a well-labelled diagram the main divisions and subdivisions of production.
5. Explain five reasons why communication is important in Commerce.