Production refers to “the creation of utility having value-in-exchange” The process of production may create six types of utilities.
1] Form utility – Form utility is the most obvious utility added in the process of production. It refers to a change of matter or substance to a more serviceable or useful shape or form. Hence it is known as form utility. Any change in shape adds utility. This is done through manufacturing activity. Eg wood to furniture, steel to utensils or cabinets, clay to pots etc.
2] Time utility – The actual supply is related to the time period. Production is undertaken at intervals and demand exists throughout the year. Therefore a commodity maybe stored or hoarded or preserved in times of abundance or when less desired by consumers and supplied or released in times of scarcity or when desired more intensely by consumers, so that their sellers can sell them at a higher price. This utility is created by whole sellers, retailers etc who stock the commodity. Time utility is always more in times of scarcity. Eg – Food grains stored during bumper crop and supplied during scarcity. Blood donation has time utility. Umbrellas in the rainy season, woolens in winter etc have time utility.
3] Place utility –Place utility is created when goods and services are transported from the place of abundance or production to the place of scarcity or consumption. So that they may be sold at a higher price. Place utility is created through transport and trading activities. Eg – from factory to market; farm to city; mines to factory or industry etc.
4] Ownership utility (possession utility) – Commodities are meant for consumption and satisfaction of wants. Producers or middlemen possess goods till consumers purchase them. A change in ownership therefore creates utility. The goods are then transferred from wholesalers to retailers to consumers. The buyer therefore enjoys ownership or possession utility. Eg a book bought by a student.
5] Service utility – Service utility is created by those who render personal services to consumers. Professionals create this utility. It is distinct from the utility created by tangible goods. Advice knowledge and other services provides satisfaction to consumers who demand these services and are willing to pay for them. This utility does not result in production of material or tangible goods. Eg – services of doctors, lawyers, consultants, teachers chartered accountants actors bankers etc.
6] Knowledge utility – Due to research and technology knowledge about goods and new uses of various goods will be discovered. Increase in knowledge therefore will increase utility. Eg when one does not know how to use a cell phone or computer its utility is less, but when he acquires the knowledge the utility of the operation of both their utility will increase.