Production

10 Key excerpts on "Production"

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  eBook - ePub

  The Economics You Need

  • Enrico Colombatto(Author)
  • 2016(Publication Date)
  • Taylor & Francis

    (Publisher)

  3 The economics of Production and growth

  DOI: 10.4324/9781315658988-4

  3.1 What can the economics of Production tell us?

  The relationship between the economics profession and the analysis of Production is mixed. On the one hand, economists are attracted by Production because it is conceptually simple, does not involve subjective judgements, and provides plenty of opportunities to engage in measurement. In particular, the economist of Production observes prices of inputs and outputs, and selects the appropriate techniques to minimise costs and meet consumers’ preferences. Yet, he feels ill at ease when he tries to model how Production develops, better technologies come to the surface and progress, new products are conceived, know-how is acquired, people interact and organisations evolve. Ideally, the economist would like to deal with a ‘typical’ firm, and then refer to real firms as specific examples of the typical firms. Yet, the typical firm exists even less than the typical consumer, and theorising becomes a daunting exercise.

  Not surprisingly, the economics profession has in fact restrained its ambitions, and inclined to engage in attempts to enhance our understanding of the Production process by categorising the various phenomena involved. In this chapter, therefore, we shall clarify the main concepts that have become familiar in everyday economic parlance (sections 3.2–3.4), delve into the relationship between the economics of Production and the life of firms (sections 3.5–3.7) and conclude by commenting on the consequences for growth (section 3.8).

  3.2 Production functions, technologies and productivity

  The basic working tool of Production economics is the so-called ‘Production function’, which shows how inputs are employed and generate output, subject to an efficiency constraint. Efficiency means that the agent succeeds in producing the maximum possible amount of output, given a set of inputs; or in using the minimum amount of inputs, given an output target. In other words, efficient Production means no wastages. Economists describe all this in terms of ‘techniques’ and ‘technologies’. The term ‘technique’ illustrates how inputs can be mixed and transformed into output. For example, a producer can use technique T1 and produce one unit of output with three units of labour and two units of capital; or technique T2 and produce one unit of output with seven units of labour and one unit of capital, or technique T3 and produce one unit of output with nine units of labour and two units of capital (note that T3 is inefficient, since T1 and T2

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  Economics

  Made Simple

  • Geoffrey Whitehead(Author)
  • 2014(Publication Date)
  • Made Simple

    (Publisher)

  Section 2: Production This page intentionally left blank 2 Basic Ideas on Production 2.1 What Does an Economist Understand by 'Production'? We have already seen that Production is the creation of'utilities' to satisfy 'wants'. It follows that the creation of both goods and services is 'pro-~ duction' to an economist. Economists do not draw any distinction between the farmer, the factory worker, the lorry driver, the doctor, or the actor as far as Production is concerned. All these workers are specialising in the creation of some commodity or service which is required by their fellow men. The farmer is not more productive that the doctor; he is only providing a different sort of utility. Physical labour is not more worthy of reward than mental labour, for all producers are engaged in a common endeavour to satisfy man's wants. If we make the mistake of belittling the 'service' trades because they are unproductive, and divert their workers into other occupations, we shall decrease satisfaction. In fact, it is precisely these occupations which are insusceptible to mechanisation which are expanding fastest in the advanced nations. Whereas fewer and fewer agricultural workers can grow more and more food by a thoughtful use of machinery and fertilisers, it is much more difficult to mechanise personal services. We are unlikely ever to see mass Production in the dentist's chair or the operating theatre. Higher levels of satisfaction in health services must therefore be achieved by training more dentists and doctors, In rather a different way the services devoted to distribution and exchange, such as transport, wholesaling, and retailing, must expand as specialisation in large factories or farms produces greater and greater surpluses to be shared out among the population. An increased number of people engaged in the provision of services is therefore inevitable and advantageous.

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  Managerial Economics

  The Analysis of Business Decisions

  • Stephen Hill(Author)
  • 2016(Publication Date)
  • Red Globe Press

    (Publisher)

  CHAPTER6 Production Contents INTRODUCITON 136 THE PRODUCITON FUNCTION 137 INPUT SUBSTITUTION 138 EFFICIENT PRODUCITON 143 PRODUCITON IN THE SHORT RUN 148 Production IN THE LONG RUN 150 APPLICATION 6 158 Introduction The previous chapter took a close look at demand theory and estimation, on the grounds that decision-making requires careful consideration of the likely benefits of any action, usually expressed in terms of revenue. The other side of the decision equation is evaluation of the costs of an action, to which the benefits can be compared. It is to the costs that we now turn, using as a starting point the economic analysis of Production. The primary activity of any commercial organisation is the transformation of inputs into outputs. It is this transformation process that now concerns us. In a general sense 'Production includes all economic activity, other than ultimate consumption' . 1 Thus teaching, writing this book, driving to work, are all produc-tion activities involving the transformation of inputs into output, and creating value that will ultimately be reflected in final consump-tion. However, the analysis will be somewhat simpler if we restrict attention to the Production of manufactured goods. Note that the Production of physical commodities differs only from the Production of services in that produced goods can be stored, whereas services can only be produced at the point and time of sale. Note also that 136 Production 137 Production is the process of transforming physical inputs into physical outputs -Production theory deals with the physical volume of inputs and outputs without any mention of money values. It is only later that we shall consider the economic decisions of what to produce or how much, for the moment we are only concerned with the possibilities of how to produce a given output.

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  Agricultural Production Economics in 2 Vols.

  • Kumar, K Nirmal Ravi(Authors)
  • 2021(Publication Date)
  • Daya Publishing House

    (Publisher)

  For example, a farmer may produce maize (output) using land, labour, capital and his managerial skills as factors of Production. On the other hand, a poultry farmer sees the maize as one of the inputs in producing eggs This ebook is exclusively for this university only. Cannot be resold/distributed. or chicken as output. Thus, the output of a firm can either be a final commodity or an intermediate product. Even the output can also be a service rather than a good such as agricultural education, banking etc. In general, ‘Production’ refers to the creation of wealth. Strictly speaking, in terms of satisfaction derived, it refers to the creation of utilities. Utility refers to the want satisfying capacity of a good. A good or service may create utility to a person in five different ways viz ., form utility (created by processing function), place utility (created by transportation function), time utility (created by storage function), possession utility (created by buying and selling function) and task utility (this utility is provided, when someone performs a task for someone else. For instance, when a bank handles financial transactions for a farmer to offer pledge loan for efficient marketing of produce, it falls under task utility). Figure 1.1 : Process of Agricultural Production. I. Factors of Production For Production of goods, rather creating utility, the farmer employs both resources and resource services and these efforts will produce the goods that satisfy human wants. A factor of Production can be defined as that good or service, which is required for Production. It is indispensable for Production because, without it no Production will be possible. The factors can be grouped broadly into four categories viz ., Land, Labour, Capital and This ebook is exclusively for this university only. Cannot be resold/distributed. Management, though the line of demarcation between some of them is not very clear.

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  An Introduction to Economics for Students of Agriculture

  • Berkeley Hill(Author)
  • 2013(Publication Date)
  • Pergamon

    (Publisher)

  These were discussed in relation to the Theory of Supply (Chapter 3) and included the avoidance of risk, the prestige of the business and the personal preferences of the entre-preneur. For the sake of simplicity, however, Production Economics 120 Production Economics 121 assumes that the sole objective of Production is the maximising of profits. Non-profit motives can be incorporated later.* The resources at a firm's disposal consist of its funds, which can be spent on machinery, buildings, raw materials, the hire of labour and land or factory space, and its entrepreneurship, or management. The entrepreneur must allocate and organise the other resources so that they are used in the best possible way — that is, so that the highest profit possible is generated from them. Production Economics is often called the Theory of the Firm because it attempts to explain the behaviour of profit-maximising firms and can be adequately described by modifying the general definition of economics given in Chapter 1 of this text. Production ECONOMICS, OR THE THEORY OF THE FIRM, IS THE STUDY OF HOW FIRMS ALLOCATE THEIR SCARCE RE-SOURCES BETWEEN ALTERNATIVE USES IN THE PURSUIT OF PROFIT MAXIMISATION. QUESTIONS FACING THE ENTREPRENEUR In the pursuit of profit an entrepreneur will have to make three major decisions: (a) what to produce; (b) how to produce it and (c) how much to produce. To a large extent the resources he has at his disposal, including his own management preferences and abilities, will answer these questions for him. For example, a farmer with land, labour and a certain stock of machinery and access to a certain amount of borrowing from banks etc. will naturally not consider producing motor cars or television sets because he does not have the right types or quantities of resources required. He will only consider products lying within the range of his abilities and resources. Given time, the farmer could sell his land, stock, machinery etc.

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  Microeconomics

  Equilibrium and Efficiency

  • Thijs ten Raa(Author)
  • 2017(Publication Date)
  • Red Globe Press

    (Publisher)

  One important issue in economics is the determination of capital and labor prices. Classical economists claim that there is no easy answer to this question, which reflects the power balance between workers and capitalists. In contrast, neoclassical economists argue that capital and labor prices are determined by their marginal rates of substitution and, therefore, by consumer preferences. The latter doctrine requires a general equilibrium analysis of the economy, which we will develop in Part IV. 6.8 Summary Production transforms inputs into outputs. Some of these outputs are used as inputs, and what remains is the net output, or national product of an economy. There are also non-produced, or factor, inputs. For each industry, revenue equals the intermediate costs plus factor costs plus profit. The latter two are value-added and sum to the national income of an economy, which is equal to the value of the economy’s national product. These relationships hold in the aggregate but not at the industry level. For example, business services contribute to national income but are not part of the national product. Input–output coefficients are used to calculate the factor contents of com-modities and also can be used to determine the gross output required to sustain an economy’s given net output. Gains in net output per factor input, with compo-nents weighted by prices, constitute total factor productivity (TFP) growth. The Solow residual deconstruction ascribes these gains to reductions in input–output coefficients – that is, technical change. This bird’s eye view of Production can be broken down into firm-level changes of technology. Exercises 1. Is it possible to have an industry with no value-added that contributes to the net output of the economy? If not, explain why not. If it is possible, give an example. Production analysis: Inputs, outputs, coefficients, and productivity 119 2.

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  Intermediate Microeconomics and Its Application

  • Walter Nicholson, Christopher Snyder(Authors)
  • 2021(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  Because economists are interested in the choices that firms make to accomplish their goals, they have developed a rather abstract model of Production. In this model, the relationship between inputs and outputs is formalized by a Production function of the form q 5 f ( K, L, M… ) , (7.1) where q represents the output of a particular good during a period, K rep-resents the machine (that is, capital) use during the period, L represents hours of labor input, and M represents raw materials used. The form of the notation indicates the possibility of other variables affecting the produc-tion process. The Production function summarizes what the firm knows about mixing various inputs to yield output. For example, this Production function might represent a farmer’s out-put of wheat during one year as being dependent on the quantity of machin-ery employed, the amount of labor used on the farm, the amount of land under cultivation, the amount of fertilizer and seeds used, and so forth. The function shows that, say, 100 bushels of wheat can be produced in many different ways. The farmer could use a very labor-intensive technique that would require only a small amount of mechanical equipment (as tends to be the case in China). The 100 bushels could also be produced using large amounts of equipment and fertilizer with very little labor (as in the United States). A great deal of land might be used to produce the 100 bushels of wheat with less of the other inputs (as in Brazil or Australia); or rela-tively little land could be used with great amounts of labor, equipment, and fertilizer (as in British or Japanese agriculture). All of these combina-tions are represented by the general Production function in Equation 7.1. The important question about this Production function from an economic firm Any organization that turns inputs into outputs. Production function The mathematical relationship between inputs and outputs.

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  Energy and Economic Myths

  Institutional and Analytical Economic Essays

  • Nicholas Georgescu-Roegen(Author)
  • 2014(Publication Date)
  • Pergamon

    (Publisher)

  Still another concerns one of the most important factors of economic development, namely, the economy of capital utilization. In the present paper, I propose to review and expand these points and to present some additional results concerning the analysis of cost of Production and of factor allocation. Contradictions, Omissions, and Surmises If our theory of Production is to be an ade-quate logical representation of actuality, it is absolutely necessary that before making even one step further we insist on knowing what cor-responds in actuality to every symbol—includ-ing F —in the popular formula (1) Q = F(X, Υ,-'-,Ζ), by which standard economics describes any static Production process. The symbol F must also be included because function by itself is an ambiguous term even in mathe-matics. However, the point is that in the standard theory not even the other symbols are connected in some definite operational manner with data observable in actuality. A few care-ful authors do go beyond Wicksteed's hollow definition. But they tell two different stories. Some conceive the Production function (1) as a relation between the quantity of product Q and the quantities of factors X, F, · · · , Z. Others conceive the Production function as a relation between the output per unit of time q and the inputs per unit of time x, y, · · · , z, briefly, as a relation between rates of flow: 3 (2) q=f(x,y, · · , * ) . A clear symptom of the standard economist's lack of respect for epistemological problems is the fact that no such economist seems to have thought of the possibility that the two view-points may not be equivalent. Even authorities use both definitions interchangeably. 4 Having been exposed by a long rote to this equivalence, we have become so firmly convinced of its validity that some of my fellow econometri-cians, on hearing for the first time its denuncia-tion, immediately protested. As Patinkin ad-8 See the sample list references given in [9], notes 4 and 5.

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  An Economic Philosophy of Production, Work and Consumption

  A Transhistorical Framework

  • Rodney Edvinsson(Author)
  • 2022(Publication Date)
  • Taylor & Francis

    (Publisher)

  2 Production, work and consumption in the history of economic thought

  DOI: 10.4324/9781003057017-2

  Evolving perspectives on the Production boundary and value

  This chapter presents past and present views on Production, work and consumption. Many controversies in economics are related to discussions of where to draw the Production boundary. A modern view takes the monetary valuation of Production, work and consumption as almost self-evident. However, a study of the history of economic thought, especially before the 20th century, reveals how this idea is historically contingent. Many of today's discussions have antecedents. For example, some of the problems of evaluating the contribution of financial services discussed in the next chapter have been already recognised by antique philosophers.

  Historically, there are three main traditions of how to set the Production boundary: the surplus, the utilitarian and the market principle traditions. In the first tradition, productive activities are described as productive of surplus or accumulation of wealth, in the second of utility or satisfaction of human needs and in the third of incomes from the market. Studenski (1958 , p. 11) similarly distinguishes between the restricted material Production concept, which includes only “material goods” (and possibly some “material services”), the comprehensive Production concept, which includes all commodities and services, and the restricted market Production concept, which only includes goods and services produced for the market. The restricted material Production concept was dominant among Classical economists, while neoclassical economists advocated the comprehensive Production concept. Modern national accounts rest on the restricted market Production concept, which goes back to the Keynesian revolution.

  Measuring aggregate Production presupposes a perception of value. Only activities that generate new value are considered productive – in the surplus tradition, it is surplus value, in the utilitarian tradition, new utility, and in the market tradition, gross output (while value added can be negative). There is a long debate amongst economists about value. A related issue concerns which Production factors are productive. Classical economists distinguished between labour, capital and land. French economists of the 18th century developed a land theory of value. A modern version is ecological economics, which emphasises the natural constraints on Production. Marxist economists instead advocated a labour value theory, according to which only labour is productive, reproducible capital is past labour and nature is not productive of its own. Neoclassical economists emphasised that both labour and capital are productive. The value added is divided between the contributions of capital and labour. Later theories added new Production factors such as knowledge, human, social and cultural capital.

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  Manufacturing Green Prosperity

  The Power to Rebuild the American Middle Class

  • Jon Rynn(Author)
  • 2010(Publication Date)
  • Praeger

    (Publisher)

  On the Production side, things are more complex. Think of the Production system as three concentric circles, that is, one circle in the middle, surrounded by another circle, and those circles sur- rounded by a bigger one. On the outside circle, called the final con- sumption system, all the goods and services that are used by people, including buildings and infrastructure, are produced. Most of the Production of goods takes place in factories, using machinery that I’ll call ‘‘Production machinery.’’ Much construction is done using construction machinery, another kind of Production machinery, out- side of factories. Production that takes place outside of the factory includes agriculture, which uses agricultural machinery; mining, which uses mining equipment; and utilities, which use electrical, natural gas, and water-management equipment. Most of what we do involves the use of machinery of one sort or the other (I’ll use the word ‘‘machine’’ interchangeably with the word ‘‘equipment’’). Even service industry offices are filled with The Economy as an Ecosystem 53 office equipment such as computers, copying machines, and tele- phones, not to mention all the cars, trucks, elevators, and lights. Restaurants use many kinds of machinery, such as cooking equip- ment, and they use food that has gone through food processing ma- chinery and been transported by trucks, gathered by agricultural machinery, and fumigated by pesticides made with chemical process- ing equipment. Even in the home, all of the remote devices, TVs, and kitchen equipment are forms of machinery. The machinery that makes the final consumer goods and services are themselves all made with a whole different set of machinery-making machinery. The machinery that makes machinery I will refer to as reProduction machinery . ReProduction machinery not only makes all of the pro- duction machinery, but makes all of the reProduction machinery.

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