(a) What is production? (b) Illustrate with a labeled diagram the main divisions and subdivisions of production.

Answer Details

(a) Meaning of production

Production is the creation of goods and services to satisfy human wants. It covers all human efforts directed at converting raw materials into finished goods and at rendering services that add value and provide utility to consumers. Production is not complete until the goods or services reach the final consumer who needs them.

(b) Main divisions and subdivisions of production

Production is broadly divided into two: direct production (a person producing goods and services for his own use, self-sufficiency) and indirect production (producing for exchange or sale). Indirect production is the main concern of commerce and is subdivided into three levels:

• Primary production: extraction of raw materials from nature, for example farming, fishing, mining, lumbering and quarrying.
• Secondary production: processing and converting raw materials into finished or semi-finished goods, for example manufacturing, construction and building.
• Tertiary production: provision of services, subdivided into commercial services (trade, banking, insurance, transport, warehousing, advertising) and direct/personal services (doctors, teachers, lawyers, entertainers).

Labelled tree diagram of the divisions and subdivisions

                    PRODUCTION
                        |
        ---------------------------------
        |                               |
   DIRECT PRODUCTION            INDIRECT PRODUCTION
   (for own use)                  (for exchange)
                                        |
             -------------------------------------------------
             |                    |                          |
        PRIMARY              SECONDARY                   TERTIARY
     (extractive)          (manufacturing/            (services)
     farming, mining,       construction)                  |
     fishing, quarrying                        -----------------------
                                               |                     |
                                        COMMERCIAL SERVICES   DIRECT/PERSONAL
                                        trade, banking,       SERVICES
                                        insurance, transport, doctors, teachers,
                                        advertising           lawyers