Production theory

In microeconomics, Production is simply the conversion of inputs into outputs. It is an economic process that uses resources to create a commodity that is suitable for exchange. This can include manufacturing, storing, shipping, and packaging. Some economists define production broadly as all economic activity other than consumption. They see every commercial activity other than the final purchase as some form of production.

Production is a process, and as such it occurs through time and space. Because it is a flow concept, production is measured as a “rate of output per period of time”. There are three aspects to production processes:

1. the quantity of the commodity produced,
2. the form of the good created,
3. the temporal and spatial distribution of the commodity produced.

A production process can be defined as any activity that increases the similarity between the pattern of demand for goods, and the quantity, form, and distribution of these goods available to the market place.