Producers | Classification, and Importance of Producers

The economy is a system that provides people with goods and services to directly or indirectly satisfy their wants. Hence, it is a total system comprising farms, factories, mines and shops, and other growing institutions which provide these goods and services to people. In this article, we have discussed only Producers.

  • The production sector is the sector where goods and services are produced. It produces by hiring various factors of production.
  • The consumption sector is also known as the household sector as it provides various factors of production to the production sector and in return receives payment for these services.
  • The government sector acts as a consumer and a producer in an economy.
    • As consumer, the government purchases goods and services from the production sector and these goods and services are consumed by society.
    • As producer, the government receives the services of various factors of production and produces goods and services for the consumption of the entire society.

Main Sectors of an Economy

Classification of Producers

  • Primary producers: These are engaged in the production of goods by exploiting natural resources such as food and other crops, fishing and cattle rearing. These are called primary goods.
  • Secondary producers: These are engaged in the production of manufactured goods in various types of industries. These are called manufactured goods or finished goods.
  • Tertiary producers: The primary and manufactured goods require various kinds of services such as transport, banking and insurance. These are engaged in producing these services.

Importance of Producers

  • Supply of goods and services: Producers are the basis of the supply of goods and services in an economy. If there is an increase in the number of producers, then there will be an increase in the supply of goods and services in the market according to the demand of consumers.
  • Efficient use of resources: There are limited resources in an economy that can be efficiently used in the production process. The producers create demand for various factors of production in their productive activities.
  • Increase in export earnings: The export earnings of a country would depend on the number of producers involved in the production of exportable goods. Hence, the volume of export earnings would increase with an increase in the number of producers producing export goods.

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