Producers

OBJECTIVES:

Identify the individuals and groups who participate in the production of goods and services.
Recognise that producers make a range of goods and services.

Economics is the study of Scarcity. Scarcity means that there are not enough resources in the world to cover all of our needs and wants.

We will be looking at how the problem of Scarcity is solved and the problems that arise with the problem of Scarcity.

Production - Production is the bringing into existence goods and services. It has there main elements to it.

Goods are tangible, something that we can touch. There are two main types of goods.

Consumer goods -

There is an input (a raw material) the input is processed and then there is an output.

INPUT - PROCESS - OUTPUT

PEOPLE AS PRODUCERS AND CONSUMERS

A producer is someone who creates / provides a good or service to other people. They are the managers and workers who supply the economy with the goods and services it needs.

Consumers are people who use a good or service.

People are usually both producers and consumers. A mechanic is a producer when they are fixing machines and cars etc. but they are a consumer when they go to Mc Donalds and buy a Mega Feast.

Producers of goods and services receive wages or profit i.e. if the owner works for him or herself.

People use the wages or profit earned to pay for goods and services from producers.

INTERDEPENDENCE.

Interdependence means that people rely on each other.

In the past people were independent - they produced all the goods and services they needed for themselves.

Now people rely upon other people for all the goods and services that they don't create for themselves. This is because in modern times people SPECIALISE - they concentrate on the production of one good or service and so they rely upon other people for the goods and services they no longer provide.

SPECIALISATION - this is where a firm or person concentrates on the making of one type of good or service.

Both workers and firms specialise.

Workers specialise in a job and become good at it, e.g. teacher, farmer, dentist, mechanic. They earn wages / salaries or profit which they use to buy goods produced by other specialist workers.

Producers also specialise. Firms concentrate on producing a particular type of good or service, e.g. cars, computers, education, or health services. They produce more than they need for themselves, and sell this surplus in order to buy the surplus of other specialist producers.

They are interdependent; workers buying from other specialist workers and producers buying the surplus from other firms.

DIVISION OF LABOUR - This is the further breaking up of the production process into separate task.

Examples of producers

Farmers market showing both a producer and consumer.

A fish market

A teacher

Police

Give an example of specialisation from the photos.
Give an example of division of labour from the above photos.

How does the farmers market and fish market show interdependence?

TYPES OF PRODUCERS

PUBLIC SECTOR

The public sector consists of both Central Government and Local Government.

Central Government is a producer and provides goods and services to the public.

The type of goods provided can be divided into Private and Collective goods.

(a)	Private goods and services which are sold for profit, e.g. logs from government-owned forests, postal services by New Zealand Post.
(b)	Collective goods and services are supplied free and paid for from taxes e.g. Police, National, Parks, main roads. Firms could not make a profit by supplying these needed services, so they are provided by the Government.

Mixed goods are those provided partly by government and partly by private firm's e.g. education has state schools and private schools, health has public hospitals and private hospitals.

Another reason for the government providing goods and services is that some goods are Merit goods and the government wants to encourage consumption of them.
These type of goods include:
Schools.
Hospitals.

Demerit goods are goods that are considered bad for us and consumption is discouraged by the government. This can be done through placing taxes on the good or regulating the production or consumption of them through the legal system. Examples include:
Drugs.
Alcohol.

Name some examples of Government Private, Collective and Mixed goods

Changes to Government Goods and Services

In the 1980s the New Zealand Government has changed the way it produces goods and services because of claims of waste and inefficiency.

Corporatisation State Owned Enterprises (SOEs), e.g. New Zealand Post.
Some Government Departments were set up to run like private firms to make a profit. This was done to try and make the Government Departments more efficient. the department were expected to make a profit, where previously they were often losing money.

Privatisation
Some of the Government S.O.E.s' were eventually sold to private companies. Companies such as Telecom were sold off to private companies. The government often made a lot of money out of this.

Local Government

Local councils look after collective goods such as water supply, drainage, sewage, local roads, libraries etc. They are paid for by rates.

Restructuring in Local Government

Local government has also gone through a process of restructuring. A lot of council services have gone through a process similar to corporatisation and are expected to make a profit.

Some council services have been turned into L.A.T.E.'s or Local Area Trading Enterprises. These council owned organisations are now expected to earn a profit. An example of this would be Waste Management in Palmerston North, which looks after rubbish dumps and other waste related services but is expected to earn a profit. Metrowater in Auckland is another example.

Private Firms

These produce most goods and services. They are privately owned and aim to make a profit. They employ workers, own land and buildings, machinery etc. and pay managers to organise the production of the goods or services to sell at a profit.

Co-operative Firms are special private firms owned by producers or consumers.
Producers e.g. Diary farmers can own together the local dairy factory they supply. The factory employs workers and managers and distributes profits to the dairy farmer owners. An example of a co-operative is Fonterra. This is a large dairy co-operative which is owned by the suppliers of the milk ( the dairy farmers).
Consumers can own shares in a large shop and receive discounts on purchases and a share of the profit.

Voluntary Groups

These groups do not make a profit but help others with the services they provide e.g. Church Groups, Clubs, World Vision, Salvation Army. Voluntary organisations often supply goods or services that a private firm may be unwilling to provide because they would not be able to make a profit from providing the commodity.