Conversion of raw materials into finished goods by means of adding utilities like form, place, time, position, service and knowledge. It includes production of both physical goods and services.

Factors of production

The factors which facilitate production and are vital in the process of production are called factors of production.

There are 4 widely accepted factors which participate in the production process namely

  1. Land
  2. Labour
  3. Capital and
  4. Organisation

Total Product, Average Product and Marginal Product

Total ProductAverage ProductMarginal Product
Total Product refers to the total output that a producer can produce by employing various labours per unit of time. Average Product is the output that is produced per unit of labour employed in the process of production. Marginal Product is the additional output that can be obtained by employing one additional labour.