DISTRIBUTION OF GOODS, INCOME AND SERVICES

 

In 1993 The Pennsylvania State University awarded me my Bachelor of Science degree in Economics.  On this page I'll provide an overview of some of the fundamentals of economics theory as they were taught to me at Penn State.
 
the diagram and text below describes how production, market price determination, and distribution of agricultural commodities as a specific example to illustrate the general process in a free market economy.

 

DISTRIBUTION is a step in the economic process which brings goods and services from those who make them to those who use them. The making of such goods and services is called PRODUCTION. The use of the goods is called CONSUMPTION.

DISTRIBUTION includes all methods by which the goods are sent from producers to consumers. Another part of this distribution process is the DISTRIBUTION OF INCOME. The distribution of income is the way in which the wealth of the nation is divided among those who produce, those who distribute goods and services, and those who consume goods and use services. Nearly all consumers are also either producers or distributors. Without the process of distribution, people would have no way of obtaining useful services or products, such as food from a farmer, clothing from a tailor, or an automobile from a manufacturer.

DISTRIBUTION OF GOODS: Many steps lie between the making of a product and its delivery to the consumer. Some of the most important steps are transportation, packaging, storage, and advertising.

Methods of distributing goods vary with the particular product and its industry. In colonial times, a shoemaker sold his shoes directly to the consumer, who ordered them before they were made. Today, most of our food, clothing, and other products are made in quantities long before any individual consumer has any thought of buying them. Goods usually go from the producer to the WHOLESALER, who is a person or a company dealing in large quantities of goods.

A WHOLESALER of potatoes buys potatoes from farmers in carload lots. Few grocers could handle such large quantities of potatoes, since they would spoil before they could be sold. The wholesaler sells smaller quantities to RETAILERS. The grocer can buy a dozen sacks of potatoes from the wholesaler's carload and sell them to his customers, who are the CONSUMERS.

STORAGE is another process involved in distribution. Foods and other products which may spoil are stored in cold-storage warehouses. Eggs, meats, seafood, fruits and vegetables are often stored for several months until they can be sold.

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thanks and credit to the National Organization for Raw Materials (NORM:   http://www.normeconomics.com) for content on distribution of goods, income and services on this page

THE CIRCLES OF DISTRIBUTION:

Here's a greatly simplified diagram showing how goods, services, and income move from place to place and from person to person.

The OUTER CIRCLE shows how wheat finds its way from the farmer to the workman, who consumes it in the form of bread. The workman helps to produce the tractor used by the farmer in growing wheat.