8 Factors that Determine the Volume of Production are listed and explained here. We hope you find it helpful and able to satisfy your research demands.
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Scarcity is a word that is often useful when a necessary commodity is not sufficient for the general population. For instance, in Nigeria, at a time of the year, there is always a kind of shortage in the supply of crude oil such as petrol, gas, etc. This shortage often leads to inflation in the price of the available.
When the goods available for consumption is not adequate enough to take care of the teeming needs of the general populace, it often leads to a kind of setback in the supply chain.
In this article, we will enthusiastically look at the factors that usually affect the volume of production of products and services in companies or better put, why we often run into shortages.
Factors that Determine the Volume of Production
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The following are Factors that Determine the Volume of Production:
1. Amount of Capital
Irrespective of what is produced, an amount of capital is required to produce and the amount of capital available to a producer often determines the volume of production.
The greater the amount of capital that is available to the producers, the higher the volume of production.
2. Availability of raw materials
No matter how much a person has for production, if the raw materials needed for production are not readily available, production cannot be done at a larger scale.
The raw materials available will determine the volume of production. The higher the raw materials available, the higher or greater the volume of production.
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Effective management is the soul of good business and production. When the production process is not properly managed, the outcome of production is usually terrible.
The management that is put in place for the production of goods and services will greatly determine the volume of production.
Efficient management will increase the volume of production as much as bad management will ruin the volume of production.
4. The market size
The ultimate aim of producing anything is for consumption. Either directly or indirectly. No company will continue in production when they have satisfied all of their potential clients.
In the context of this article, the size of the market is synonymous with the demand for goods produced. The greater the demand for the goods; the greater the volume that will be produced.
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5. The efficiency of other factors of production
The more efficient other factors of production are, the more the increase in the volume of production will be.
If all other factors of production are in good shape and working at their best, the company will often produce more goods.
6. Level of technology
The use of modern technology usually leads to a high volume of production as against the use of local technology, which can never increase the volume of production.
Technology has found its way into all sectors of life such that when properly harnessed, it can rapidly increase the volume of production.
7. Storage facilities
When storage facilities are made available for storing goods that have been produced, it will, in turn, encourage or lead to a high volume of production by companies but when storage facilities are lesser, the production volume will be greatly affected.
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8. Nature of the goods
There are some goods that cannot be stored for a long period of time. If the goods produced are durable, they can be stored and this encourages a high volume of production, but perishable goods which cannot be easily stored can lead to a low volume of production.
Before a company begins production, they should put all of these into consideration and the government can equally help out to ensure that these things are judiciously provided.