Production | Definition in economics:

Production of goods is very crucial concept in micro economics. Non-economic wants of a human are satisfied by no effort but to fulfill economic ones we must have to participate in some sort of economic activity, this activity is known as production process.

So production is a process by which we convert the resources into final form, which are ready for the consumption for the sake of satisfying the desired wants. Production process involves following concepts:

Change of Formation:

Changing the form of the good may increase the utility of the good. For example: milk into yogurt etc.

Change of Place:

Change of the place or location of the good may also increase or decrease the utility of a good. For example: sugarcane taken to the sugar mill etc.

Change of Time Period:

Change of time can also affect the utility of the good. Sweater has greater utility in winter as compared in summer.

Factors of Production:

Production of a good is divided into following four factors:

Land:

When we consider land as factor of production we do not only mean about the surface of the earth but all the resources beneath the earth are also involved.

Labor:

In economics by the concept labor mean that any mental or physical work done for the sake of reward.

Capital:

The kind of wealth which is not used to satisfy the human wants directly but to produce further more wealth. For example: car used by a person as a taxi etc.

Organization:

In economics by the concept organization we mean that the owner of any business which takes the responsibility of profit and loss.

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