PRODUCTION[1] - PRODUCTION AND FACTORS OF PRODUCTION...

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PRODUCTION AND FACTORS OF PRODUCTION Production is a process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output). It is the act of creating output, a good or service which has value and contributes to the utility of individuals. Economic well-being is created in a production process, meaning all economic activities that aim directly or indirectly to satisfy human needs. The degree to which the needs are satisfied is often accepted as a measure of economic well-being. In production there are two features which explain increasing economic well-being. They are improving quality-price-ratio of goods and services and increasing incomes from growing and more efficient market production. The most important forms of production are Market production Public production Household production In order to understand the origin of the economic well-being we must understand these three production processes. All of them produce commodities which have value and contribute to well-being of individuals. The satisfaction of needs originates from the use of the goods and services which are produced. The need satisfaction increases when the quality-price-ratio of the goods and services improves and more satisfaction is achieved at less cost. Improving the quality-price-ratio of goods and services is to a producer an essential way to enhance the production performance but this kind of gains distributed to customers cannot be measured with production data. Economic well-being also increases due to the growth of incomes that are gained from the growing and more efficient market production. Market production is the only production form which creates and distributes incomes to stakeholder Factors of production refer to an economic term to describe the inputs that are used in the production of goods or services in the attempt to make an economic profit. The factors of production include land, labor, capital and entrepreneurship. In essence, land, labor, capital and entrepreneurship encompass all of the inputs needed to produce a good or service. Land represents all natural resources, such as timber and gold, used in the production of a good. Labor is all of the work that laborers and workers perform at all levels of an organization, except for the entrepreneur. The entrepreneur is the individual who takes an idea and attempts to make an economic profit from it by combining all other factors of 1
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production. The entrepreneur also takes on all of the risks and rewards of the business. The capital is all of the tools and machinery used to produce a good or service. The scarce resources that are useful not so much for direct and immediate satisfaction of human wants as for producing other goods or services. Economists often find it useful for purposes of theoretical simplification to group the millions of different sorts of factors of production into
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