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Production - Business Studies Form 1

Production

By the end of the topic, you should be able to:
(a) explain the meaning of production

(b) distinguish between different types of utilities

(c)distinguish between direct and indirect pr
oduction

(d)describe the levels of production and occupations related to each
(e) discuss the factors of production and the reward for each
(f) explain the role of division of labour and specialization in in the production process
(g) classify goods and services produced in an economy.

Meaning of production
Production means creation of goods and services in order to increase their usefulness to the consumers.
The process of production is incomplete until the goods reach the final consumers

Click below to see the various stages of tea production

TEA PLANTING

TEA PLANTATION

TEA PROCESSING






Utility

Meaning of utility
Utility is the usefulness of a good or service or the ability of a good or service to satisfy a human want.
Types of utilities

Form utility
-This is the conversion of raw material into finished products

Place utility-This is taking of goods and services from producers to consumers. It is created through distribution.

Time utility-T
his is making goods and services available to the consumers all the time they need them. It is created through storage

Possession utility-
This is transfer of ownership of a good from the seller to the consumer. It is created through process of exchange

Factors of Production

For production to take place various factors are involved.
Imagine you are visiting a factory. What would you see?

First and foremost, you would see land and buildings. Inside the buildings, you would find machineries, equipment, employees, or workers. Most probably there will be electricity or any other source of energy to run the machines. There would be tea which is being processed.

Then you may also find vehicles bringing in the raw tea leaves and others taking away the processed tea leaves to the market. All these things seen in a factory can be classifed as either land, capital ,labour or Entrepreneurship. Land ,Labour , Capital and Entrepreneurship are the factors of production.

Meaning of factors of production

Factors of production are the resources which facilitate production of goods and services.
They include land, labour, capital and the entrepreneurship


Land; includes the site on which the factory is built and other natural resources .Land refers to all natural resources for example farmland, water etc
 

Labour; These are the factory employees. Labour refers to all the physical and mental contribution of an employee in the process of production.
Capital; This refers to the buildings and equipment used to make the products. Capital refers to all those items that go into producing goods and services.


Entrepreneurship; This is the the organisation of other factors of production ie land, labour and capital into suitable proportions.

Utility
Meaning of utility
Utility is the usefulness of a good or the ability of a good or service to satisfy a human want.
 

Types of utilities
Form utility-This is the conversion of raw material into finished products


Place utility-This is the bridging of geographical gap between the place of production and place of consumption. It is created through distribution

Time utility-T
his is the bridging of the gap between time of production and time of consumption. It is created through storage

Possession utility-
This is transfer of ownership of a good from the seller to the consumer. It is created through process of exchange

Rewards of factors of production

They are the payments made for use of factors of production.

Direct production refers to production of goods and services for one's own consumption while indirect consumption is the production of goods or services for sale.


Division of labour and specialization
Division of labour refers to breaking down of the production process into stages and assigning each stage to one worker or a group of workers. The individuals in this stages are said to be specialized in what they do.
Specialization therefore is where an individual concentrates on one line of production in which he/she is best suited. The specialty could be in terms of skills, qualifications or experience.

Role of division of labour and specialization

1. Increases output per worker
2. Encourages invention and innovation
3. Encourages the user of machines
4. Enables workers to gain skills in a particular field

Levels of production and their occupations

(a) Primary level

This involves the extractions of natural resources from their natural state.

Occupations in this level include; lumbering, farming, mining etc.

(b) Secondary level

This involves transforming of raw materials into finished products.

It includes:

(i) manufacturing industries e.g food processing and textile making lass

(ii)construction industries e.g road construction and buildings of houses.

Occupations in this level include: carpentry, masonry and engineering.

A tyre factory

(3)Tertiary level;

Tertiary production involves provision of services. These services could either be commercial or personal.

Commercial services include the services in movement, storage and distribution of goods.

Personal services :These are direct personal services. They involve provision of services where the provider of the service and the receiver are in close personal contact.

Occupations involved in this level include banking, retailing ,insuring

Classification of goods and services

Goods and services can be classified on the following basis:-

a) Producer and consumer goods

Producer or capital good refers to goods used to produce others goods or to provide e.g machines.

Consumer goods refer to goods used directly by the consumer. Examples include bread ,cars, watches e.t.c.

d) Durable and perishable goods

Durable goods are those that that last for long period of time .Examples are furniture , buildings ,earrings e.t.c

Perishable goods are also called non- durable goods .They are those goods which cannot last for a long period of time .Examples are milk, bananas, cabbage e.t.c.

c) Material and non material goods

Material goods are those that one can see, feel and touch.

Non-Material goods are those that we can not touch or see. They include services such as medical care teaching , legal services e.t.c.

D) Private and public goods

Private goods are goods owned by individuals for their own use . Examples are private house , personal car etc.

Public goods are those goods that can be used by any member of the public . They are either owned by the government or community . Examples are public roads, public schools , public hospitals , public stadiums etc.


 

  Rewards of factors of production

Rewards are the payments for factors of production


.

DIVISION OF LABOUR AND SPECIALISATION .

Division of labour.

This refers to breaking down of production process into stages and assigning each stage to an individual.

Specialisation.

This refers to where one concentrates on one line of production in which he/she is best suited.

Role of division of labour and specialisation .


1.Increases output per worker.

2.Encourage invention and innovation.

3.Encourage the use of machines.

4.Enables the worker to gain skills in a particular field.

CLASSIFICATION OF GOOD AND SERVICES PRODUCED IN AN ECONOMY.

Goods and services can be classified on the following basis

(a)Producer or consumer goods.

Producer goods/capital goods refers to goods used to produce other goods or to provide services . e.g machines.

consumer goods refers to goods used directly by the final consumers e.g.bread, private car and watch.

(b)Durable and perishable/non- durable goods.

Durable goods are those expected to last for along period of time.e.g.Buildings,furniture and earings.

Perishable/non-durable goods are those goods which cannot last for a very long time e.g meat,ripe bananas and chalk.

(c) Material and non-material goods.

Material goods are those that one can see,feel and touch.

Non-material goods are those we cannot see or touch .They are the same as services .e.g medical care,teaching and legal services.

(d)Private and public goods.

Private goods are goods owned by an individual for his/her personal use.

Examples include; private house ,personal car.

public goods are those that can be used by any member of the public.They are either owned by the government or by the community.e.g publi roads,public hospitals public schools.

FACTORS OF PRODUCTION


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