Nature of production

• Production process


  The steps involved in converting input to output
• Sections of the production process

  • Input
  • Throughput
  • Output
• Input


  The raw materials or components of production
• Input


  • Bauxite
  • Gold
  • Agricultural produce
• Throughput


  The process that the raw materials or components go through before being converted into finished products
• Output


  The finished goods that have been generated from production
• Output


  • Bread
  • Aluminium
  • Banana chips
• Factors of production


  • Land
  • Labour
  • Capital
  • Entrepreneurship
• Scarcity


  Resources are limited but human wants are unlimited
• Production decisions


  • What to produce
  • How to produce
  • When to produce
  • Where to produce
• Profit motive


  Firms seek to produce those products that will return the highest profit
• Demand


  The willingness and ability of a person to purchase a particular product at a particular price at a particular period of time
• Market research


  Used to gather information from consumers for the firm
• Firm produces what it can


  Instead of finding out what consumers want
• Production concept


  Firm produces the product that its current equipment and technology can produce
• Financial viability


  The product will be able to make enough money to cover the investment costs and also earn a profit in the foreseeable future