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:
- the quantity of the good or service produced,
- the form of the good or service created,
- 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:
“To expect to increase prices and then to maintain them at a higher level by means of a plan which must of necessity increase production while decreasing consumption is to fly in the face of an economic law as well established as any law of nature.”
—Calvin Coolidge (1872–1933)
“Freud was a hero. He descended to the “Underworld” and met there stark terrors. He carried with him his theory as a Medusa’s head which turned these terrors to stone.”
—R.D. (Ronald David)