THE PRODUCTION

THEORY
MOTIVATION
PRODUCTION THEORY
- is the study of production, or the
economic process of converting
inputs into outputs.
INPUT-PROCESS-OUTPUT
Resources used

Production

Goods or services that are

produced
 PRODUCTION
• is a process that combines various
material inputs and immaterial inputs
(plans, know-how) to make something
for consumption (the output).
 PRODUCTION
• Uses resources to create a good or
service that is suitable for use. This can
include manufacturing, construction,
storing, shipping and packaging.
 THREE ASPECTS IN
PRODUCTION PROCESSESS:
1. The quantity of the good or service produced,
2. The form of the good or service created.
3. The temporal and spatial distribution of the good or
service produced.
 ECONOMIC WELL-BEING
• is created in a production process, meaning all
economic activities that aim directly or indirectly
to satisfy human needs.

Two features explain increasing economic well-being

:
1.) Improving quality-price-ratio of commodities
2.) Increasing incomes from growing and more
efficient market production.
 MOST IMPORTANT
FORMS OF
PRODUCTION
1. MARKET PRODUCTION
2. PUBLIC PRODUCTION
3. HOUSEHOLD PRODUCTION
 MARKET PRODUCTION
• refers to the
production of a
product or service
which is intended
for sale at a money-
price in a market.
PUBLIC PRODUCTION

• When goods
are produced
directly by the
government.
 HOUSEHOLD PRODUCTION

• is the production of goods and

services by the members of a
household, for their own
consumption, using their own capital
and their own unpaid labor.
PRODUCTION AS A
SOURCE OF
ECONOMIC WELL
BEING
 STAKEHOLDERS OF
PRODUCTION
- person, groups or organization
with an interest in a producing
company.
 SUPPLIERS

- producers of materials
- the changed in prices of
supplied commodities
have an effect on
company and suppliers
PRODUCER COMMUNITY

- participants in production
( workers or employees)
- The parties that contribute to
production receive increased
incomes from the growing
developing production.
 CUSTOMERS

-consumers
- customer get more
for less this means that
more need satisfaction
is achieved at less cost.
PRODUCTION
COMMUNITY
 PRODUCER COMMUNITY
● stakeholders / producers
● have a common interest in maximizing
incomes.

The quality of a commodity goes up and

the price goes down over time.
 STAKE HOLDERS
● referred to here as producer communities or, in
shorter form, as producers.
● refers to anyone, including a person, group,
organization, government, or any other entity
with a direct or indirect interest in its operations,
actions, and outcomes.
The producer communities have a
common interest is maximizing their
Incomes.
The well-being through commodities
stems from the price quality relation of
the commodities.
 PRODUCTION FUNCTION
● This development favorably affects the
production functions of customers.
Customers get more for less. Consumer
customers get more satisfaction at less
cost.
 PRODUCTION GROWS
● when the production grows and becomes more
efficient, the income tends to Increase.
● Production brings about an Increased ability to pay
salaries, taxes and profits.
● The growth of production and improved productivity
generate additional Income for the producing
community
● Similarly , The high-Income level
achieved in the community is a result of
the high Volume of production and its
good performance. this type of well
being-generation -as mentioned earlier-
Can be reliably Calculated the From
production data.
 MAIN PROCESSES OF A
COMPANY
● Real Process
● Income distribution process
● Production process
● Monetary process
● Market Value process
 PRODUCTION OUTPUT
● is created in the real process,
productivity gains are
distributed in the income
distribution process and these
two processes constitute the
production process.
 REAL PROCESS
●generates the production output
from input, and it can be
described by means of the
production function.
● The characteristics created into the product by the
manufacturer imply surplus value to the consumer, and
on the basis of the price this value is shared by the
consumer and the producer in the marketplace.

● In Marxian economics, SURPLUS VALUE is the

difference between the amount raised through a sale of
a product and the amount it cost to the owner of that
product to manufacture it.
● The real surplus value to the producer is a result of the
real process, real income, and measured proportionally
it means productivity.
● The concept "real process" in the meaning
quantitative structure of production process was
introduced in Finnish management accounting in
1960's. Since then it has been a cornerstone in the
Finnish management accounting theory. (Riistama et
al. 1971)
 INCOME DISTRUBUTION
PROCESS
● refers to a series of events in which the unit
prices of constant-quality products and
inputs alter causing a change in income
distribution among those participating in
the exchange.
PRODUCTION PROCESS
● consists of the real process and the income
distribution process.

● They differ from the factors of the real process

in that the components of profitability are given
at nominal prices whereas in the real process the
factors are at periodically fixed prices.
 MONETARY PROCESS
● refers to events related to financing the
business.
● MONETARY POLICY is the process by
which the monetary authority of a country, generally
central bank, controls the supply of money in the
economy by its control over interest rates in order to
maintain price stability and achieve high economic
growth.
 MARKET VALUE PROCESS

● refers to a series of events in which

investors determine the market value of
the company in the investment markets.
THANK YOU !