Factors That Determine What To Produce are listed and explicated in this article. We hope you find it informative and helpful for your research.
Factors of Production
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Companies do not just produce things for human consumption, at least if you must give anything to a person which they will appreciate, you should first and foremost find out what it is that such a person really needs at the moment.
The same is true of business, for your product to really be bought and sold in the marketplace and In order for production to be swift and fair, a lot of things need to be put into consideration and some of those things are highlighted in this article.
Factors That Determine What To Produce
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Below are the Factors That Determine What To Produce:
1. Need of the Consumers
Every person who is into production will have to take into consideration what it is that the consumers need. You need to know what need you are meeting rather than just produce randomly, it is when you have taken this into consideration that you will really ascertain what to produce and what not to.
2. Market size or demand
The rate at which a particular commodity is demanded by the consumers is also a factor to consider when going into production.
Of course, you are in the production business to meet needs and ultimately make money, but it will be utterly useless if you end up producing commodities that are already in excess in the marketplace or you underproduce. Producers should endeavor to produce only what is needed in the market and at the right quantity per time.
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3. Income of the Consumers
When trying to determine what to produce, it is very important the producers take into consideration the average earning of his or her potential consumer, this will help in fixing a good worth or price on the products lest they produce products that are not affordable by the consumers or end up devaluing their products because they think that consumers cannot afford it.
4. Cost of production
Producers should always ask, ‘How much will it cost to produce this product?’ as long as the production cost is low enough for producers to make some profit after productions and sales, he will go ahead with the production plan but if the production cost is on the high side, two things usually happen, (i) he will not produce at all (ii) he will go ahead with the production in small quantity and then it will lead to inflation.
5. Availability of Resources
As long as the raw materials, capital, and resources needed for production are readily available, production will be done at ease but when they are scarce, exhausted, or unavailable, production will become very impossible, this is why most companies usually site their plants close to where the needed raw materials are.
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6. Type of economy
The type of economic system in a particular society usually determines the type and quantity of goods and services that are produced.
For example, in a capitalist economy, the price system determines the type and quantity of goods and services that are to be produced as profit becomes the major or determining factor of what is produced whereas in a socialist economy, the state controls and directs the allocation of resources hence it decides what to produce with the sole aim of satisfying the wants of the whole citizens of the society or state.
These factors usually come into play in all fields of production regardless of whether it is a goods or service company.