Production

• Production is the process of creation of utility.
• Production of saleable goods is just the process of adding utility to the raw materials.
• It is the process of value addition to the raw materials.

Methods of creating/adding utility:

• Form utility: converting iron into tools
• Time utility: selling when the market price is high
• Place utility: transporting apple to terai
• Service utility: training to farmers in a farm
• Possession utility: cricket bat to the players
• Knowledge utility: searching for a new cultivar

Therefore, production has a broader meaning than the common understanding as manufacturing, providing training, searching for new knowledge, transporting all are production. Production has great importance in economic activities as there will be no consumption without production. It creates employment and increases; the country progresses.

Consumption

It is the direct use of goods and services for satisfying current wants.

It is the process of use of the utility.

Examples: Eating food, playing, driving a car.

Types of consumption

a.  Slow and fast consumption: Durable goods are consumed slowly, but the perishable ones are destroyed fast.

b. Direct and indirect consumption: Food and car are consumed directly whereas, fuel, cooking gas, etc. are consumed indirectly.

c. Today’s consumption and tomorrow’s consumption: Today’s consumption is for satisfying a present need whereas, tomorrow’s consumption keeps a reserve for future generations.

d. Consumption of good and service: Goods are Food items, clothes, cars, etc. Services are Teachers, doctors’ services, etc.

e. Useful and Wasteful consumption: Useful consumption has usefulness whereas wasteful consumption is overexploitation of resources like overeating, taking a high dose of medicines, etc.

f. Individual and government consumption: Individual consumption fulfills individual consumer’s need like, eating food by consumer and Government Consumption meets nations’ need, for example, government investment.

g. Consumption of consumers’ and producers’ good: Consumers consume final products like Fruits, vehicles, etc. whereas producers consume Inputs, raw materials, etc.

h. Consumption has big importance in economics as it is the beginning and end of all economic activities. It gives a signal to the producer to produce goods and services.