Consumers often gain utility not directly from the goods that they purchase, but instead they transform the goods by a household production function into something that they value. The idea was originally proposed by Gary Becker and Kelvin Lancaster in the mid 1960s.
Examples
A simple example of this is baking a cake. The consumer purchases flour, eggs, and sugar, and then uses some time and their labor to produce a cake. The consumer did not really want the flour or sugar, but they purchased them so that they could produce the cake that they actually wanted.
The distinction between enterprises and households is not in all cases sufficient to draw a satisfactory production boundary.
The household that buys the direct services rendered by other households is thought of as buying at cost, in its capacity as a consumer, the direct services from a production account to which is debited the cost of services.
Production of primary products, that is, the characteristic products of agriculture, fishing, forestry, mining, and quarrying
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