How do You decide What to Produce?

What are the Factors of Production? What to produce is a Problem of Which Kind of Economy? What are the Steps to Create a New and Successful Product?

In our economy, the central issue faced by the producers is how to find what to produce. Different people have different needs to fulfil that require different goods and services to produce an item depending upon the demand for the product among individuals and whether a product can fulfil the consumer’s desires or requirements or not while raising a fair business for himself in the economy. The factors of production depend upon the availability of resources and technology for the production factors. Let us learn more about what to produce is a problem of what and whether is there any major need to produce things.

1. What are the Types of Production?

For general purposes, production must be divided into three major categories: Primary Production, Secondary Production and Tertiary Production. (See How can You Compare Producer Vs Consumer?)

2. What are 4 Factors of Production?

The factors of production are the resources that serve as the foundation of the economy which is what people use to manufacture services and goods. Economists classify production elements into four types: land, labour, capital, and entrepreneurship

3. What to Produce?

Keeping individual demands in mind, this challenge involves deciding which goods and services to manufacture and how much of each to produce. Having more of one good or service usually implies having less of others. Every individual in society has different desires since the criteria are most demanded goods and services will be produced in all economies because economies cannot produce everything because they have limited resources.

In the era of scarcity, the production of goods has lowered drastically making it turbulent to satisfy human needs. Furthermore, production should be done in such a manner that it can satisfy needs while making profitable businesses. Therefore, deciding what to produce should be based on the product’s major demand, according to which its supply should be managed and products be developed. Furthermore, demand and supply must be balanced to maintain a stable equilibrium in the economy. (See How is Demand used in Economics?)

4. How do You decide What to Produce?

Photo by Mohamed Boumaiza on Unsplash

The decision of what to produce is very important as it dictates the course of action and sustainability of the business. In command economies, the government decides the good that is to be produced and in market economies, the producer himself decides the product based on demand in the market and the profitability of the product. 

5. What do You need to Produce Things?

Factors of production are the inputs required to create a thing or service, and they include land, labour, entrepreneurship, and capital. People who control the factors of production are frequently the wealthiest members of society. The factors of production are frequently controlled by business owners and investors in capitalism. The government or community frequently has greater control over the factors of production in socialist systems.

  • Land: It encompasses all natural resources beneath and above the earth’s surface. It is a location to develop and work and one of the most basic and natural factors in production while it includes all-natural endowments such as lakes, seas, hills, mines, forests, etc. Rent is the method of payment for the land.
  • Labour: All human effort that involves in production is referred to as labour as they are the ones who make the product. Their effort can be mental or physical since it is a human factor of production in which workers apply their efforts, abilities, and skills to generate payment. The payment method for their labour is wage.
  • Capital: Capital refers to any man-made resources employed in the manufacturing process that are a produced element of production; this includes industries, machinery, equipment, tools, raw materials, wealth, and so on. The payment method for capital interests.
  • Entrepreneur: An entrepreneur is someone who gathers other manufacturing factors in one area because he is the one who employs people in the production process and decides what to produce, where to produce, and how to create, whereas he is the person who makes these decisions and bears the associated risk. Profit is the payment for the land. 

6. What to Produce in What Quantities?

Determining the quantity of any product to be produced is of absolute importance as it defines the profitability of the product. Allocating the limited resources to produce the maximum number of products to obtain economies of scale but not overproducing to lose the edge and cause supply thus disturbing the equilibrium is the entire idea behind planning the quantity to be produced. 

7. What to Produce is a Problem of What?

Do you know the problem of what to produce is a problem of what? Basically, it is a massive dilemma faced by producers in a market economy as they have to consider factors like demand, human needs and profitability to decide what to produce. This problem requires a lot of attention as a single economy cannot produce everything because of limited resources; hence a producer has to decide which product to produce based on the available set of resources. (Also read Who Receives the Goods and Services Produced?

8. Why do You Need to Produce?

The reasons for the need to produce are: 

  • Any increase in output leads to economic growth as measured by GDP which indicates the overall output of an economy’s products and services helps in boosting the economy.
  • Improved economic growth raises living standards by lowering costs and raising earnings. Additionally, increased productivity allows an economy to create and consume more goods and services while employing the same quantity of labour.
  • Individuals such as workers and customers, corporate leaders and analysts, and politicians and government statisticians all value productivity as they create jobs and income, which helps the economy grow.
  • The work that occurs from concept to finished product is essential to the success of the invention and adds to the development of quality through the use of labour on land and money.
  • Increases satisfaction since more items suggest significant improvement while knowing the relationship between cost and production.

9. How do You Create a New Product?

Photo by Tumisu on Pixabay

In some industries, the probability of failure for new goods and services can reach 90%, but there are some basic steps you can take to ensure your product does not suffer the same fate. Follow these five measures to increase the chances of your new product’s success: 

A. Recognize an opportunity and come up with a new idea to fill it

If no one wants or needs your product, it will fail, because the starting point for every product creation should be to analyse the market and determine the demands of current and potential customers their levels of satisfaction with what the competition offers, their consumption habits, and the technical capabilities for upgrading existing products.

B. Assess the Opportunity

After gathering information on market trends and your strategic objectives, the next step is to study the segment or segments that the product is oriented toward and predict future buying habits as much as possible, as product development tools can help identify demands and group them according to to set criteria.

C. Create the Concept

During this stage, the new product concept is improved to best serve the demands of future clients and stand out from the competitors; this can be done by communicating with influential consumers and professional market analysts to determine the viability and demand of the product. The main goals are to please the client, stand out from the competitors, and demonstrate the highest profit potential.

D. Evaluation

You must now develop your prototype and evaluate its performance. If the product is adequate in meeting the demand of the customer if it is aligned with the modern trends and if the product is functioning efficiently, all these are important aspects along with considering the cost of production and launch to determine profitability. It is also important to study the position of the product in comparison to its competitors.

E. Launch and Position

After researching and designing the product, the crucial plan of launching the product is prepared and executed, planning the launch of the product is essential not only to create customers but also from an economic standpoint. In a competitive market where the products are closely priced and on par with each other in technology, brand image and marketing are the factors which help in deciding which product will dominate the market, this part of the cycle is planned under the positioning of the product. (Also read What is Consumer Science Definition?)

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