Production And Commerce

What is commerce?

Commerce is study related to distribution of products from the producer (point of production) to the consumer (point of consumption).

Products, Production, Producer and Consumers

Products are the goods and services produced by a company, to satisfy needs and wants of customers.
Production is any activity which serves to satisfy human needs and wants.
Producer is a person or company who produces products to satisfy need and wants.
Consumers are the ultimate users of goods and services produced.

Creation of Utility

Utility of form: Any activity that changes the form of a product so that it becomes more useful to the consumer for example conversion of wood into more useful furniture.

Utility of place: Any activity that transfers the goods or services to a location which is within easier assess to the consumer, for example transfer of goods from far off factories to nearby retail shops.

Utility of time: Any activity that causes the availability of a product on time when it is needed, for example availability of wheat through out the year.

Needs and Wants

Needs are the things necessary for living, that is food, shelter and clothing.
Wants are those goods and services which are not compulsory for living but makes life easier.

Specialization/Division of Labour

Specialization or Division of Labour is breaking down of a productive activity into simpler tasks so that a person specialist in that task can perform it.

Advantages of Specialization

Disadvantages of Specialization

Forms of Specialization

Specialization at country level occurs when a certain country devotes itself mainly to produce certain products which it exports to other countries.

Specialization at region level occurs when a particular region in a country devotes its self in producing certain types of products, which is used by all the country.

Specialization at town level occurs when a particular city in a country devotes its self in producing certain types of products, which is used by all the country.

Specialization at firm level occurs when a firm is divided into departments and within departments individual workers have their own specialized duty.

Branches of Production

Primary Production

Secondary Production

Tertiary Production

Note: Production is completed only when goods reach point of consumption.

Location of Production Units

Agricultural Unit

  1. Climate: A farmer must ensure that crop is planted to a area where climatic conditions allow the production of that crop for example temperature and rainfall.
  2. Nature of land: A farmer must select land which is flat and fertile.
  3. Access to markets: A farmer must have a farm near to the market or customers, because most of agricultural products are perishable (for example sugar cane). There should be efficient and cheap transportation system available.
  4. Labor: Without labor it would be very difficult to carry out the production.
  5. Government policy: Government may favour the production of a particular crop at particular area by providing cheap land and giving other incentives.

Manufacturing Unit

  1. Transport: Factory must be located where cheap and efficient transport facilities are available.
  2. Power source: Factories are set up where there is cheap and adequate supply of electrical power.
  3. Labor: Both skilled and unskilled labor should be present.
  4. Nearness to market: Factory should be near its customers to avoid high transportations cost.
  5. Government policies: Government may provide certain very attractive incentives for factories for example in rural areas to provide jobs to the people.

How are manufacturing and tertiary activities inter-related?