Production is a very important economic activity. The standard of living of people in the ultimate analysis, demands on the volume and variety of production. In fact, the performance of an economy is judged by a level of its production. Those countries which produce goods in large quantities are rich and those which produce little of them are poor. Thus, the amount of goods and services an economy is able to produce determines the richness or poverty of that economy. The process of growth or development consists in increasing the level of production in the economy. Germany is rich country just because its level of production is high. Nepal is poor because its level of production is very low.
Production is any economic activity which is directed to the satisfaction of the wants of the people. Whether it is the making of material goods or providing any service, it is included in production provided it satisfies the wants of some people. So, in economics, if making of cloth by an industrial worker is production, the service of the retailer who delivers it to consumers is also production. Similarly, the work of doctors, lawyers, teachers, actors dancers etc. is production since the services are provided by them to satisfy the wants of those who pay for them. The satisfying power of goods and services is called utility.
Production consists of various processes to add utility to natural resources for gaining greater satisfaction from them.
Production is nothing but the creation of utilities in the form of goods and services. For example, in the production of a woollen cloth at the spinning and weaving mill (utility created by changing the form). Then it is taken to a place where it is to be sold (utility added by transporting it). Since woollen clothes are used in winter they will be retained until such time when they are required by purchasers (time utility). In the whole process, services of various groups of people are utilised (as that of mill workers, shopkeepers, agents etc.) to contribute to the enhancement of utility.
Factors of Production
The process of producing good in the modern economy is very complex. A good has to pass though may stages and many hands until it reaches the consumer’s hands in a finished form. For the productive process to work, there must exist factors or resources—natural and man-made—with which to produce goods and services. Land, labour, capital and entrepreneurial ability are all the factors which make it possible to produce goods and services.
We discuss these factors of production briefly.
Land
The term ‘land’ is used in a special sense in economics. It does not mean soil or earth’s surface alone but refers to all free gifts of nature which would include besides the land, in common parlance, natural resources, fertility of soil, water, air, natural vegetation etc. We may list the following characteristics which would qualify a given factor to be called land:
Land is a free gift of nature.
Land is strictly limited in quantity. It is different from the other factors of production in that, for practical purposes, it is permanently in being; no change in demand can affect the amount of land in existence.
According to Ricardo, the production power of soil is indestructible in the sense that the properties of the land cannot be destroyed even if its fertility gets depleted. It can be restored.
Land cannot be shifted from one place to another place. The natural factors typical to a given place cannot be shifted to other places. It may, however by noted that man has been able to shift water from one place to another. Land can however, be used for varied purposes though its suitability in all the uses is not the same.
Land is said to be a specific factor of production in the sense that it does not yield any result unless human efforts are employed. Land varies in fertility and uses.
Labour
The term ‘labour’, means mental or physical exertion directed to produce goods or services. It refers to various types of human effort which required the use of physical exertion, skill and intellect. Labour, to have an economic significance, must be one which is done with the motive of some economic reward. Following are the characteristics of labour :
Labour, as compared with other factors is different. It is connected with human efforts whereas other are not directly connected with human efforts. As a result of this, there are certain human and psychological considerations which may crop up unlike in the case of other factors.
Labour is highly ‘perishable’ in the sense that a day’s labour lost cannot be completely recovered because the expenditure on maintenance has to be there. Whatever is lost in a day cannot be recovered wholly by extra work next day. In other words, a labourer cannot store his labour and so he has no reserve price for his labour.
Labour is inseparable from the labourer himself. It implies that whereas labour is sold, the producer of labour retains the capacity to work. Thus, a labourer is the source of his own labour power.
Labour power differs from labourer to labourer. On the basis of labour power a labour may be classified as unskilled labour, semi-skilled labour and skilled labour. Labour power depends upon physical strength education, skill and upon the motivation to work.
All labour is not productive in the sense that all efforts are not sure to produce resources.
Labour has a weak bargaining power. It is because the labourer is economically weak while the employer is economically sound.
Division of Labour
Division of labour is an important feature of modern industrial organisation. It refers to a scheme of dividing the given activity among workers in such a way that each worker does one activity again and again, he becomes an expert in it and specialises in it. The efficiency of individual worker is enhanced by means of greater specialisation. Division of labour increases output per worker on account of higher efficiency, specialised skill and on account of repetitive work on a given task or a part of it.
Mobility of labour
Mobility of labour refers to willingness of workers to move from one job to another or from one place to another. When a worker moves from one place to another in search for better job prospects, we call it territorial mobility of labour. Occupational mobility results when one moves to another job in the same industry or similar jobs in a different industry. Occupational mobility can be vertical or horizontal. When an individual moves to a higher level from a lower level it is called vertical mobility. When he moves to a similar type of job in a different organisation, it is called horizontal mobility. Mobility of labour is affected by the following factors:
Family-bond: Stronger the joint family bonds, lesser are the chances of people moving outside their native places in search of better jobs. With the development and growth of nucleus family, labour mobility tends to increase.
Stage of development: The more advanced a society, the greater is the mobility of its people. Social environment and degree of adaptability among people play an important role in mobility of labour.
Iniformation and knowledge: The more knowledgeable the people are about different places and job prospects, the more is the tendency to move.
Means of transport and communication: Means of transporation and communication facilitate mobility of labour from one place to another and from one job to another.
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