Production is an important economic activity, which directly or indirectly satisfies the wants and needs of the people. It is concerned with the supply side of the market. The standards of living of the people depend on the volume and the variety of goods produced. Without production, there cannot be consumption.
Richness or poverty of the nation and performance of the economy is judged by its level of production. Those nations which produce commodities and services in large quantities are considered rich and others which produce less are considered poor.
Production is the transformation of inputs into the output of a commodity or several commodities (in case of point production) in a specific period of time at the given state of technology. In production process, even both input and output may be intangible.
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Thus, the word production in Economics is not simply confined to effecting physical transformation in the matter it also covers rendering of services such as teaching, consultancy, transporting, financing, retailing, packaging, etc.
In a broad sense, production implies the creation or addition of form, place and time utilities by the production and storage, distribution of different usable commodities and services.
Production enhances the utility of the product by changing it to the form in which the consumers need it. Distribution through transportation increases the usefulness of the product by bringing it to the location where the consumer needs it.
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In the absence of transportation, the product may be just as useless to the consumer as it would be if it were still a collection of raw materials. Likewise, storage gets the product to the consumer when he needs it.