Types of production in commerce

len Alfred Ajibola - Thu, 02nd January, 2020 @ 8:58 PM

Topics in Commerce

Contract of Employment: Terms of employment contract Principle of Marketing: People as a marketing mix and their importance Principle of Marketing: Positioning as a marketing mix Principle of Marketing: Packaging as a marketing mix Elements of promotion in marketing mix Principle of Marketing: Promotion as a marketing mix Principle of Marketing: Place as a marketing mix Principle of Marketing: Price as a marketing mix Principles of Marketing: The seven principles of marketing mix Factors necessary for division of labour Disadvantages of division of labour Advantages of division of labour Concept of Outbound Marketing Inbound Marketing explained Types of production in commerce Commerce: Definitions and Scopes of Commerce Differences between balance of trade and balance of payments Balance of payment deficit and balance of payment surplus Disadvantages of foreign trade Divisions of foreign trade

Academic Questions in Commerce

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In commerce, which of the following is false with regards to a commodity?

  • A. A commodity must always have a market value

  • B. Rendered services are also instances of commodities

  • C. Products applicable to commodities can be bought or sold with money

  • D. A commodity must be standardized

  • E. A commodity must be usable upon delivery

  • F. Commodities can be traded in the futures market

Whatever is being marketed must always provide value to its potential consumers.

  • A. True

  • B. False

Which of the following is not a branch of marketing?

  • A. Merchandising

  • B. Promotions

  • C. Forex

  • D. Search Media Optimization

  • E. Social Media Optimization

  • F. Copywriting

Which of the following is not a characteristics of commerce?

  • A. The only aim of commerce is to make profit

  • B. It is a discontinuous process after profit had been made

  • C. It is accompanied with challenges and uncertainties

  • D. It is 100% business and economic activity

  • E. Transaction processes are always involved in commerce

  • F. It connects the process of production and marketing

Which of the following is not a function of commerce?

  • A. Unnecessary in times of emergencies like earthquakes and wars

  • B. Facilitates mass production of goods

  • C. Influences transportation network within and outside a state

  • D. Attempts to satisfy human needs and wants

  • E. Improves the standard of living

  • F. Acts as an online business link between buyers and sellers

One of the following is a form of division of labour.

  • A. Agonistic division of labour
  • B. Antagonistic division of labour
  • C. Mutualistic division of Labour
  • D. Advanced division of labour
  • E. Solitary division of labour
  • F. Occupational division of labour

A place where people buy homogenous goods in large quantities is called _____.

  • A. Wholesaler's Market

  • B. Goods Market

  • C. Products Market

  • D. General Market

  • E. Commodity Market

  • F. Forex Market

Any activity aimed at getting people interested in a company's product or service is termed _____.

  • A. Commerce

  • B. Economics

  • C. Financial Accounting

  • D. Marketing

  • E. Production

  • F. Distribution

Types of Production:

We have three types of production in commerce. These are:

1. Primary Production

The focus of primary production are on raw materials. Any activity that involves the acquisition of materials from the surface of the earth with the intention of satisfying human needs or want is referred to as primary production.

Please read the introduction to production here.

As an instance, primary production is said to occur when a farmer prepares a land for crop production, plants on the farmland and eventually harvests the agricultural produce.

You can read on the differences between plants and crops here.

Another example of primary production is seen when a miner goes down the earth in search of gold, diamond, iron or any other natural resources.

Also, a fisherman doing his job of catching fishes on the sea or ocean is considered to be involved in primary production.

Please read the processes involved in starting a home based fish farming here.

In primary production, the produce or products are derived in their raw form. As a result, the materials or products derived from primary production can be further processed during secondary production.

Please read on the functions and characteristics of commerce here.


2. Secondary Production

Any activity that turns raw materials (or intermediate materials) from primary production into a finished product is referred to as secondary production.

You can read on the division of labour here.

As an instance, secondary production involves the conversion of iron ore (raw material) obtained from mining into a finished product like steel.

Another instance is seen when cassava (a raw material from agricultural produce) is processed into 'garri'. Garri is a local food in Nigeria. It is the finished product in this instance.

In simple terms, secondary production involves the assembly and manufacturing processes of production.

You can read on the advantages of foreign trade here.

Meanwhile, understand that production industries will always obtain their raw materials from primary production in order to manufacture a variety of products. For instance, the plastic industry may obtain its raw materials from oil, natural gas and coal which are products derived from the fractional distillation of petroleum or crude oil.

Please read on fractional distillation of petroleum here.


3. Tertiary Production

Any activity that puts finished goods or services into the hands of the final consumer is termed tertiary production.

Please read on supply here.

You can read on consumer right and protection here.

Tertiary production include the commercial services that support the distribution processes of production.

Please read on the principles of marketing here.

Examples of tertiary production include activities carried out by the distributive sales person or marketers, advertising companies, banks, transporters, teachers and so on.

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Amazing facts in Commerce

With Amazon Smile, you can donate 0.5 percent of your purchases to a charity of your choosing

Check it out here

The brewery, Sankt Gallen in Japan, produces a beer called Un Kono Kuro from elephant's dung

North Korea and Cuba are the only countries in the world where you can't buy Coca-Cola

Amazon is an e-commerce website launched in 1995. It did not make any profit for its first seven years.

Amazon's first profit was in 2003. Its founder 'Jeff Bezos' is the richest man in the world as at 2018/2019


Balance of Trade can be defined as the total value of goods imported and exported by a country during a specific period; usually yearly or annually.

Balance of trade can be either positive, negative or zero

  • A positive balance of trade implies that a country exports more goods than its imports. China as a country is likely to have a positive balance of trade since it exports a variety of goods to other countries.

  • A negative balance of trade is often considered as an unfavorable balance of trade since the country's importation exceeds its exportation. Nigeria (as at 2018) is likely to have a negative balance of trade.

  • A zero balance of trade is reached when imports equal exports.

Please read on balance of trade and balance of payments here.

Balance of Payments is defined as a record showing the relationship between a country’s total payment made to other countries and the total money received from other countries within a time period.

The balance of payments is a guide that tells a country whether it has enough savings to pay for all its imports. It will also show the economic output of a country.

  • Needs are things considered necessary for an individual or a group of persons. Personally, they may be referred to your required goods and services. Your needs are necessary and you consider them very important for your well-being. Examples are food, clothes and shelter.

  • Wants are always desired. They are not necessarily required and you can absolutely do without them. Examples of wants are expensive cars and watches.

According to Parkinson and Bates, Production is defined as an organized activity of transforming resources into finished products in the form of goods and services.

From the above definition, the objective of production is therefore to satisfy the demand for goods and services.

It is worthy of note to state that whenever services are rendered, such rendered services are also considered as production. This is true because the rendered services satisfy the needs or wants of the recipient or consumer.

Therefore, people who provide services like hairdressers, security men and public bus drivers are considered productive; and whatever service had been rendered can appropriately be referred to as production.

Please read more on production here.

prepayment is somewhat an opposition to deferred payment. This is true because the concept of prepayment oversees that the buyer makes payment beforehand and must wait to enjoy whatever had been paid for after some significant time had elapse.

In short, you can think of a prepayment as 'paying in advance'. An example is when a tenant pays in advance to a landlord for an apartment yet to be used. Another example is an online payment for items yet to be received.