LESSON 6: THE ESSENCE

OF PRODUCTION
 OBJECTIVES:
At the end of the lesson, the students are
expected to:
1. Define production.
2. Enumerate the different factors of
production.
PRODUCTION
- is a process wherein inputs are
combined to create output.

-process of using resources to

produce goods and services
that satisfy the needs and
wants of individuals and
businesses.
PRODUCTION
Two kinds of goods that may be
produced:
Consumer Goods- sold
directly to the product
Producer Goods- used to
produce other goods
 PRODUCTION
FACTORS OF PRODUCTION
- refers to resources or inputs used to produce goods and
services .

1. Land
- includes all the natural resources.
- soil, rivers, forest, mineral, water
and fertile lands
 PRODUCTION
FACTORS OF PRODUCTION

2. Labor
- refers to the exertion of physical
and mental efforts of individuals
or workers.
- is often referred to as the most
crucial input in the production
process.
 PRODUCTION
FACTORS OF PRODUCTION

3. Capital
- a finished product which is used
to produce goods.

- Tools and machinery used to

produce goods or service.
 PRODUCTION
FACTORS OF PRODUCTION

4. Entrepreneur
- one who organizes land, labor, and
capital, makes business decisions,
innovates and bears risk for his/her
decision.

- Called as the captain of

industry.
CHART 1

LAND

LABOR GOODS AND

CAPITAL SERVICES

ENTREPRENEUR

Role of Factors of Production

CHART 1

Land
RENT

Labor WAGES

Capital INTEREST

Entrepreneur PROFIT

Flow of Payments to the Factors of

Production
Rent- payment for the use of land and
other natural resources received by
the landlords.

Wages- amount of money received by

workers as payment for their services.
Interest- payment received for the
productive services of capital.

Profit- entrepreneur received this

payment after deducting all his/her
expenses in the operation of the
business.
PRODUCTION
FUNCTION
Objectives:
1. Explain the production function.
2. Enumerate the methods of
production.
3. Compute for the average product
and marginal product.
=
PRODUCTION FUNCTION
- Shows the relationship of physical
inputs and physical outputs in
business or production.
???
- A farmer uses one hectare of land for
planting corn. He uses a farm tractor,
workers in the farm, corn seedlings,
pesticides and fertilizers. After such
time, the farmer invested 300 cavans of
corn.
Fixed input
-factors of production used in
business operation that cannot be
immediately changed in the short
run.
Variable input
-resources which can be changed
easily according to the desired
volume of production.
The Production Function

Machines
Raw materials Houses
Land Rice
Machineries Vegetables
PRODUCTION
Factories Clothing
Workers skills Jewelry
and services Computers
Cell phones
 Three Stages of
Production
Fixed Input (FI) Variable Input Total Product Average Marginal
Hectare of (VI) (TP) Product (AP) Product (MP)
Land No.of Workers Cavan of Palay
1 1 12 12 -
1 2 30 15 18 Stage 1
1 3 49 16.33 19
1 4 51 12.75 9
1 5 58 11.6 7
1 6 63 10.5 5 Stage 2
1 7 66 9.4 3
1 8 66 8.25 0
1 9 64 7.11 -2
1 10 58 5.8 -6 Stage 3
Methods of Production

Mechanization

Division of
Computerized
Labor Methods of MAchine
Production

Automation
Production Line
Methods of Production

1. Mechanization- work in the

factory or industries is done mostly
by machines rather than people.
Methods of Production

2. Production Line- the goods

being produced are moved through a
line of workers.
Methods of Production

3. Division of Labor- Each worker

has an assigned task to perform.
Methods of Production

4. Automation- people act as

overseer of the work done by
machines.
Methods of Production

5. Computerized Machine- Highly

sophisticated computer controlled
machines are used to produce goods
and services.
 Three Stages of
Production
Fixed Input (FI) Variable Input Total Product Average Marginal
Hectare of (VI) (TP) Product (AP) Product (MP)
Land No.of Workers Cavan of Palay

1 1 12
1 3 48
1 5 59
1 7 67
1 9 69
 Three Stages of
Production
Fixed Input (FI) Variable Input Total Product Average Marginal
Hectare of (VI) (TP) Product (AP) Product (MP)
Land No.of Workers Cavan of Palay

1 1 12 12 -
1 3 48 16 2
1 5 59 11.8 2
1 7 67 9.57 2
1 9 69 7.67 -2