Wednesday, July 31, 2013

Introduction: How does a system produce?


  Despite of the world being made out of enigmatic complexity, probability and chances randomizing it but yet maintaining balance in the society, our world still runs a basic system of reliance.  We live in a society where one is motivated by his or her needs to perform and accomplish the needs of others, thus actions are made for the system to produce.


 For instance, a business is in need of sales to generate profit thus, products are made for the ease or comforts of the customers. Vice versa, the customer is in need of comforts or ease in life therefore, buying the product of the business, generating sales.

  In business economics, this statement refers to the two factors of business- Production and Consumption. If an action were to be made, there will be a reaction. These factors correspond with one another, describing the needs of a business and the needs of the customer, in order to fulfill the cycle of the exchange between the customer and the business

Tuesday, July 30, 2013

Production


Production is the usage of resources to produce or modify products in order to satisfy the needs and wants of customers.  This process involves the addition of value to products, attracting the customers to purchase their products. Examples of production are such as the processing of wood to paper.





Monday, July 29, 2013

Classification of Production


Before producing, a business must determine on what it should produce. Once these decisions are made, the business must be aware of which category of production they fall in in order to establish relationships with other business. These few types of production are:

Primary Production
This field of production involves the extraction of raw materials which are to be sold to other businesses to manufacture their products. Examples of this are mining, logging and fishing.



Secondary Production
This production comprises of the processing of raw materials to produce semi-finished or finished products. The semi-finished products will be continued by other secondary productions in profession. Examples of this production are factories.


Tertiary Production
These businesses such as restaurants and barber shops provide services to the customer. The product of this production is the service itself.


Sunday, July 28, 2013

Methods of Production


To boost efficiency, the process of the manufacturing of the product is manipulated accordingly to the situation and criterion the business has to fulfill. The ways of preparation varies to the type of products being prepared and the amount of customers. Here are a few of the well-known methods of production:

Job Production


  Alex is a car engineer who modifies cars for his customers. The cars are redesigned specially by him to suit the customer’s liking with different ranges of speed and handling. Although it might take some time, his customization are impressive therefore the customers don’t mind paying a higher price for it. He only continues to his other orders only after he finished his previous ones.

  Job production refers to the individual production of an item which must be completed before starting on another one.  These productions are usually made to be ordered and designed specifically to the customer’s liking.

Advantages
-Fulfills customer’s needs specifically
-Workers have more freedom and variations in their jobs
-Stocking of goods are not required due to individuality

Disadvantages
-Requires large amount of time
-Experience and skills are compulsory
-Expensive equipment and machinery

Batch Production


  An order of a 100 cans of grape juice is made and 50 cans of orange juice are made. The factory then manufactures the first batch of grape juice, only proceeding to the manufacturing of the next batch of orange juice. Both orders of juices are made with the same processes however differentiated by their batches and their flavor.

  Batch production refers to a group of items manufactured together by batches. Similar products may be produced in different batches undergoing the same processes. This production is usually established by businesses such as food manufacturers with similar products to be distributed or sold.

Advantages
-Gives variation to the workers due to the production of different products
-Larger range of coverage of products therefore larger range of customers

Disadvantages
-Large amount of storage needed  for raw materials and products
-More cost and time needed when changing products


Flow Production


  The coke manufacturing factory is required to produce 100,000 cans of coke per week.  The factory has to produce coke non-stop in order to achieve the goal or loss will be suffered.  Although most of the processes are fully automated, there are still needs of labor for operation control in the assembly line. The workers are allocated a specific role or task which will be repeated continuously.


  Flow production is a continuous production of a standardized item in a massive scale on an assembly line where workers and machinery have specialized tasks and roles. This production is recommended for commercialized products which has very high demands.

Advantages
-Mass production in a continuous process
-Specialization of  work
-Profit from economies of scale
-Lower cost of production due to lower requirements

Disadvantages
-Large amount of storage needed
-No variation in job
-Expensive machinery
-Very liable to demands with high risks of overstocking



 


Saturday, July 27, 2013

Consumption



 When a product is finished, it is sent to the market for sales. The product is then sold and income is received. Consumption differs to the consuming of products by the people, the sole reason for production- Consumption is the demand while production is the supply. It is the estimation or data of the amount of products sold, measuring the company’s profit.
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Friday, July 26, 2013

How is consumption determined?



  The first impression of a country’s economy is by looking at the gross domestic product (GDP), the gross amount of profit made by a country in a year, in terms where consumption plays a large role. Hence, much effort is inserted by the government to estimate and improve consumption.

  From the dictionary of economics, consumption is defined as “the using up of goods and services having an exchangeable value”.  The needs of the customers vary and changes along with the products sold, thus, how do we determine consumption?

  Consumption can be determined by the durability of the product, durable products such as televisions and non-durable products such as food are separated in consumption, as they have different influences on the business.

  The categorizing of the product- the ten chapters of expenditure can be also used to determine the consumption rate accordingly to the field of needs the product fulfills. These ten chapters are:

1. Food
2. Clothing and foot wear
3. Housing
4. Heating and energy
5. Health
6. Transport
7. House furniture and appliances
8. Communication
9. Culture and schooling
10. Entertainment

 Consumption from people can be estimated by identifying the classes of the consumer and the development of the society. Different classes of consumer have different amount of income, therefore different level of consumption.


  The rich usually has higher spending levels than the poor. They tend to buy better products than the poor due to different rules of decision making. Their consumption are varies along with the society and are more vulnerable to advertisements. 




References:1. "Consumption: A Key Concept in Economics." Consumption: A Key Concept in Economics. N.p., n.d. Web. 24 Jan. 2013. <http://www.economicswebinstitute.org/glossary/cons.htm>.2. "Economics: GDP." Economics: GDP. N.p., n.d. Web. 24 Jan. 2013 <http://www.cliffsnotes.com/study_guide/GDP.topicArticleId-9789,articleId-9733.html>.3. "Product Differentiation. N.p., n.d. Web. 24 Jan. 2013 <http://www.economicswebinstitute.org/glossary/product.htm>.









Thursday, July 25, 2013

The Relationship between Production and Consumption


As mentioned, production is the supply while consumption is the demand. Both are variable by changes made from each other. The demand increases inversely with the price, when the price increases, the demands decreases while the supply increase along with the price due to the amount of profit the producer makes per unit.


  Combined together in a same graph, they intersect with each other at a point called an equilibrium which is a balance between over-supplying and shortage. With over-supplying, the price must be decreased to restore equilibrium while with shortage, the price is increased.


Below is a video from YouTube which evaluates further on the demand and supply curve.