Economics: Production: Introduction, Function and Types of Division of Labour

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In order to satisfy our wants we have to produce various types of goods and services. Production is the result of the combined efforts of the four factors of production -land, labour, capital and entrepreneurship. These are also called inputs or resources.

Concept of Production Function

Production is defined as transformation of inputs into output. The resources used in production are called inputs and the goods and services produced are called output. Production function tells us the technical relationship between inputs and output of a firm. It tells us the maximum quantity of output that can be produced with the help of given quantities of inputs. Technology or method of production refers to the ratio in which inputs are combined to produce output. So, the production function is also defined as ‘a technological relationship that tells us the maximum output producible from various combinations of inputs.’

Different Technologies of Production

Goods and services can be produced in more than one way.

Different Technologies of Production

Different Technologies of Production

Labour Intensive Technology

When there is a more use of labour and less use of capital per unit of output in the production of our commodity that is called labour intensive technology. This type of technology is used in household enterprises and enterprises who produce self-consumption products.

Capital Intensive Technology

  • When we make more use of capital and less use of labour per unit output in the production of our commodity that is called capital intensive technology of production. This type of technology is used when the production is made on a large scale for sale in the market in order to earn profit.

  • Another aspect of organizing the production activity is division of labour. Division of labour means splitting up of the production activity into many processes and assigning every process among different workers according to their aptitude and ability. Division of labour is of the following two types.

Types of Division of Labour

Types of Division of labour

Types of Division of Labour

Product Based Division of Labour

If a worker specializes in the production of a single good or service, it is called product-based division of labour. When the production is made for self-consumption or on a small scale there is the use of product-based division of labour. Ex. Farmer, potter, etc.

Process Based Division of Labour

In case of process-based division of labour, the production of a commodity is divided into many processes and a worker specializes in one or two processes, that is called process-based division of labour. Division of labour increases the efficiency of workers and lead to the possibility of inventions and discoveries because of repetitive nature of work. It encourages the use of machines in place of manual labour. It also leads to the use of capital-intensive technique of production. For example, Britannia Bread Company manufactures bread.

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