Production Theory

Production theory is the study of production, or the economic process of converting inputs into outputs. Production uses resources to create a good or service that is suitable for use, gift-giving in a gift economy, or exchange in a market economy. This can include manufacturing, storing, shipping, and packaging. Some economists define production broadly as all economic activity other than consumption. They see every commercial activity other than the final purchase as some form of production.

Production is a process, and as such it occurs through time and space. Because it is a flow concept, production is measured as a “rate of output per period of time”. There are three aspects to production processes:

  1. the quantity of the good or service produced,
  2. the form of the good or service created,
  3. the temporal and spatial distribution of the good or service produced.

A production process can be defined as any activity that increases the similarity between the pattern of demand for goods and services, and the quantity, form, shape, size, length and distribution of these goods and services available to the market place.

Read more about Production Theory:  Factors of Production, Total, Average, and Marginal Product, Diminishing Returns, Diminishing Marginal Returns, Many Ways of Expressing The Production Relationship, Isoquants, The Marginal Rate of Technical Substitution

Famous quotes containing the words production and/or theory:

    “The development of civilization and industry in general has always shown itself so active in the destruction of forests that everything that has been done for their conservation and production is completely insignificant in comparison.”
    —Karl Marx (1818–1883)

    “We commonly say that the rich man can speak the truth, can afford honesty, can afford independence of opinion and action;—and that is the theory of nobility. But it is the rich man in a true sense, that is to say, not the man of large income and large expenditure, but solely the man whose outlay is less than his income and is steadily kept so.”
    —Ralph Waldo Emerson (1803–1882)