COMBINE TREATMENT OF PRODUCTION, DIVISION OF LABOUR & SPECIALIZATION

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Last Updated on November 23, 2020 by Simnify

MEANING OF PRODUCTION

Production is any economic activity that is aimed at creation of goods and services for the satisfaction of human wants. Production also includes the distribution of goods to the final consumers. Production involves the creation of tangible goods such as books, vehicles furniture items, bags, footwear etc as well as services (intangible goods) which are capable of satisfying human wants e g services of teachers, lawyers, security officers medical personal etc.
TYPES OF PRODUCTION
Production is broadly divided into two:Direct Production and Indirect Production
  1. Direct production has to do with economic activities aimed at meeting household needs. It is usually carried out on small scale, employing mostly family labour. Examples are crop farming, poultry, fishing etc for house hold consumption only.
  2. Indirect Production: This involves the production of goods and services on large scale for commercial purpose. Modern equipment and skilled labour are often engaged. The producer makes use of the proceeds of his sales to satisfy his other wants since he cannot produce all he needs.

Production is classified into three stages:
  • Primary production
  • Secondary production
  • Tertiary production
  1. Primary production: This refers to the production of basic raw materials to be used in their natural form or for the production of other goods.It involves majorly the extraction of raw material from the land, sea and air. Examples are mining, quarrying fishing and forest activities.
  2. Secondary production: This is the stage of production where raw materials or semi-finished goods which satisfy consumers’ wants. This includes manufacturing and construction of building, roads bridges.
  3. Tertiary production: this involves the production of services. Those engaged in distributive trade and service professionals complete the production process by making goods and services produced at the primary and secondary stages reach the final consumer where and when they are needed e g teaching, medical service, insurance, legal service, banking, etc.
FACTORS OF PRODUCTION
Factors of production are the material inputs or resources which are needed to produce goods and services. These are;
  • land,
  • labour,
  • capital
  • entrepreneur.

  1. LAND
Land, according to economists, is a gift of nature and includes land surfaces, mineral resources, water and forest resources, rain, sunshine etc. The reward for lands is rent.
Features or characteristics of land
  1. Land is fixed in supply: land and its natural resources are fixed in supply. They cannot be replaced once they are exhausted.
  2. Land is a free gift of nature: it is a natural endowment, not produced by human effort.
  3. Land is immobile: it cannot be moved or transferred from one place to another.
  4. Land differs in quality and value from place to place. The fertility of a piece of land makes it suitable for agricultural purpose more than an infertile piece. Also, the location 0f a piece land determines its economic value.
  5. Land is subject to the law of diminishing returns especially in agricultural practice. A piece of land that is cultivated years after year becomes less productive over time.

  1. LABOUR
Labour is the human skill, knowledge and effort (mental or manual)utilized in the production of goods and services to satisfy human wants. Labour can be skilled, semi-skilled or unskilled.
  1. Skilled labour requires long and professional training e g engineers, construction, accountants, lawyers, etc.
  2. Semi-skilled labour requires less intense training e g auto mechanics, barbers, hair dressers, caterers, tailors etc.
  3. Unskilled labour requires minimal or no training e g traders, guards, messengers, launderers, etc.
The reward for labour is wages or salaries.
FEATURES OR CHARCTERISTICS OF LABOUR
  1. Labour is a human factor of production
  2. Labour is both geographical and economical mobile
  3. Labour acquire skill trough training
  4. Labour is variable (not fixed) factor
  5. Labour can control and combine other factor of production
  6. Labour is an active factor required to put other factors together

  1. CAPITAL
Capital can be described as resources or physical assets produced by man to be used in the production of other goods and services. It is referred to as wealth created for the creation of further wealth. It is a man-made aid to production. Capital resources include building, machine, agricultural tools, vehicles etc. The reward for capital is interest. Capital may be fixed or circulating. It is fixed when it is not used up during production e g buildings, machine, and vehicles. Circulating or working capital is used up in the course of production or changed into other form e g raw materials, money etc.
CHARACTERISTICS OF CAPITAL
  1. Capital is a man-made resource
  2. Capital takes varied forms-machines money, materials etc
  3. Capital can be in various forms: fixed or variable, mobile or immobile, machines, money or other input.
  4. Capital deprecates with time and can eventually become worn-out or out-dated.

  1. ENTREPRNEUR
This is the factor of production that organizes and co-ordinates the other factors of production in required combination for efficient maximum production of goods and services at minimum cost. This is done with a view at making profit. An entrepreneur is the owner of the business organization. The reward of entrepreneur is profit.
FUNCTION OF THE ENTERPRENEUR
  1. He is the risk bearer of the business organization. He takes risk and bears the out-come, loss or profit, failure or success.
  2. He is a decision maker. He takes important decisions having to do with what to produce, how, where and for whom to produce.
  3. The entrepreneur provides funds and required capital for the production.
  4. He is the coordinator. He organizes, manages and directs the activities of the business.
  5. He organizes and combines the factors of production in right proportions for efficient production at minimal cost. He determines the scale of production and seeks for information.

THE ORIGIN OF MODERN DIVISION OF LABOUR
It was one of the forefathers of Economics – Adam Smith who enunciated the theory of division of labour in 1776 in his book titled “THE WEAITH OF NATIONS”. Adams Smith visited a place where pins were made and found that pin-making involved eighteen different processes at that time. He also found that one man was coordinating all the processes of pin-making all alone. As a result of this rigorous and slow process involved in the processes of making pins, that man was producing 20 pins a day. Adam Smith came to a conclusion that if these eighteen pin-making processes were handled by different individuals instead of one man, more pins will be produced. This idea of division of labour thought out by Smith was then applied; as a result, 48,000 pins were produced per day. This is how the application of modern division of labour came to existence in our present day.

DEFINITION OF DIVISION OF LABOUR
Division of labour may be defined as a system of breaking down production processes into different stages so that each stage is undertaken or handled by an individual. This division of production processes will depend on the type, size of industry and goods produced. It should be known that in modern times, division of labour is more applicable in an industrial economy than in agricultural economy. Example: Textile industry which is subdivided into, spinning, weaving and dyeing, warping, beaming, drafting and denting.

SPECIALIZATION
Specialization may be defined as the act of an individual or a firm or a country concentrating its resources and efforts in the production of relatively few commodities in which it has the greatest advantage over others.
There is specialization in division of labour and division of labour is the result of specialization. The two are interwoven. The major aim of division of labour and specialization is to increase productivity i.e. output.
Types of Specialization
  1. Specialization by products: This is when a firm, individual or government concentrates in the production of a particular commodity.
  2. Specialization by process: This is the concentration of a firm or individual or government on an aspect or stage of production process
  3. Territorial or geographical specialization: This is the concentration of a geographical area or territorial area on the production of a product.
  4. Sex specialization: This is also known as custom or race or tradition specialization. Here, a kind of production is being carried out by the sex i.e. male or female
ADVANTAGES AND DISADVANTAGES OF DIVISION OF LABOUR/SPECIALIZATION
Advantages or Merits of Division ofLabour and Specialization
  1. Time saving
  2. Increase in production
  3. They reduce fatigue
  4. They increase the skill of workers
  5. It leads to specialization
  6. Creation of employment opportunities
  7. They make the use of machines in production possible
  8. Improvement in the quality of goods
  9. Reduction in cost per unit
  10. Economy of using tools
Disadvantages or Demerits of Division ofLabour and Specialization
  1. They make work monotonous
  2. They bring about decline in craftsmanship
  3. The use of machines reduces employment opportunities
  4. They bring about immobility of labour
  5. Increase in interdependence among individuals and industries.
LIMITATIONS OR FACTORS THAT ENCOURAGE OR DISCOURAGE DIVISION OF LABOUR
  1. The size of  the market
  2. The availability of labour
  3. The nature of the product
  4. Availability of capital
  5. Technical difficulties or possibilities
  6. Government policy.
SCALE OF PRODUCTION/ ECONOMIES OF SCALE
By economies of scale or scale of production, we mean the growth of a firm or an industry resulting from expansion of the volume of productive capacity which leads to increase in output and decrease in its cost of production per unit of output.There are two types of economies of scale;
  1. Internal economies and internal diseconomies
  2. External economies and external diseconomies
INTERNAL ECONOMIES AND INTERNAL DISECONOMIES
Internal economies also known as the economies of large scale production are the advantages a firm derives from the expansion of its scale of production as a result of its own single efforts. In this case, as the size of the firm increases, there will be greater efficiency resulting in the fall in the cost per unit of output. On the other hand, when the firm’s expansion leads to less efficiency and increase in the cost per unit of output as a result of internal difficulties or organizational constraints, the firm is suffering from what is known as internal diseconomies.
ADVANTAGES OF INTERNAL ECONOMIES OF LARGE SCALE PRODUCTION OR ADVANTAGES A LARGE FIRM HAS OVER A SMALL FIRM
  1. Technological or technical economies
  2. Marketing economies
  3. Research economies
  4. Financial economies
  5. Managerial economies
  6. Welfare economies
  7. Training economies
  8. Risk-bearing economies
DISADVANTAGES OF INTERNAL ECONOMIES OF LARGE SCALE PRODUCTION OR ADVANTAGES OF SMALL SCALE PRODUCTION  OR ADVANTAGES OF SMALL- SCALE FIRM OVER LARGE –SCALE FIRM
  1. The relationship between employers and employees of a large firm is more impersonal than a small scale firm
  2. It is easier for a small-scale firm to adjust to business changes than large-scale firm
  3. A large-scale firm has increase business risks more than a small-scale firm
  4. It requires more capital to establish, run and finance a large-scale firm than a small-scale firm
LIMITATIONS TO THE SCALE OF PRODUCTION OR LIMITATIONS TO THE GROWTH OF FIRMS   
  1. The size of the market
  2. Need to satisfy individual taste
  3. Complexity and the increasing cost of  the organization
  4. Increased risks
  5. Falling price of the commodity
  6. The size of capital available
  7. Nature of the firm’s products and nature of the business
  8. The organizational ability of the managers of the firm
EXTERNAL ECONOMIES AND EXTERNAL DISECONOMIES
External economies are the benefits a firm derives from increase in its output and decrease in costs due to helps the firm receives from other firms especially in the use of their products. It simply refers to those benefits which attributable to a firm as a result of being located close to others. External economies are manifest more in industrial estates.
External diseconomies on the other hand, are the increased costs a firm will experience as a result of increasing its output resulting from external effects. They advantages and disadvantages of localization of industries are equally apply to external economies and diseconomies.

EVALUATION
  1. Mention the major types of production.
  2. Explain step by step the three stages of production.
  3. When is production said to be complete?
  4. Who is an entrepreneur? What role does he play in production process?
  5. Mention the factors of production and the rewards accruable to each.
  6. Explain production
  7. What is the main aim of production?
  8. Give five example of (i) Goods (ii) services
  9. Mention the faction necessary for production to take place.
  10. What is labour? What are its features?
  11. What is division of labour?
  12. Why is division of labour more applicable in industrial economy than in agricultural economy?
  13. What is specialization?
  14. State four types of specialization and explain them.
  15. Mention five advantages of division of labour and specialization
  16. State four disadvantages of division of labour and specialization.
  17. Enumerate four limitations of division of labour.
  18. Explain four factors that can encourage/discourage division of labour or specialization
  19. State the types of economies of scale
  20. Explain the types of economies of scale.
  21. Elucidate the advantages of internal economies of large scale production.
  22. Discuss the advantages a large firm has over a small firm.

Objective Test
  1. Production involves
  1. Creation of goods and services
  2. Selling of goods and services
  3. Manufacturing of goods
  4. Mining and forest
  5. All of the above
  1. One of the following is not a reward of factors of production
  1. Rent
  2. Dividend
  3. Profit
  4. Wages
  5. Interest
  1. The Co-coordinator of factor of production is
  1. Manager
  2. Controller
  3. Entrepreneur
  4. Economist
  5. Accountants
  1. Mining, fishing and forestry come up under _______
  1. Tertiary
  2. Primary
  3. Indirect
  4. Secondary
  5. Direct
  1. Which is NOT a variable factor of production?
  1. Labour
  2. Tools
  3. Money
  4. Land
  5. Raw-materials

REFERENCES
  • Fundamentals of Economics for SSCE by R.A.J. Anyanwuoa
  • Comprehensive Economics for SSS BY Johnson Ugoji, Anyaele

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