Production is a process of combining various material inputs in-order to make something for consumption. It is the act of creating an output, a good or a service which has value and contributes to the utility of individuals.
An economic well being is created in a production process. This includes all economic activities that aim directly or indirectly to satisfy human wants and needs.
There are three important forms of production.
- Market production
- Public production
- Household production
All of these production processes produce commodities which have value and contribute to well being of individual economic agents.
Market production is the only production form which could create and distribute income to stakeholders. Public production and household production are financed by the incomes generated in market production.
Thus, market production has a double role in creating economic well being, i.e., the role of producing goods and services, and the role of creating income.