Factors which influence the decision on what goods and services to produce

Business studies study module
  • Profitability

Businesses tend to provide goods and services that would yield maximum profit.

  • Level of competition

In order to survive in a competitive market, firms must come up with products with products that consumers prefer. A firm may therefore develop products that are not currently available or copy rivals ideals and improve on them.

  • Cost of production

A firm would produce commodities for which production costs are low.

  • Demand/ market

A firm will produce commodities that have the highest demand since demand leads to high sales volume.

  • Availability of resources

A firm can only produce commodities for which the necessary resources are available. Such resources include raw materials, labor, equipment, adequate space and appropriate technology.

  • Government policy

A firm should produce goods which are favored the government policy e.g. low taxation and subsidies. Firms should not produce goods that are illegal as it will be breaking the law.



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