The correct option is (c).
Explanation
The 'putting-out system' is a domestic system of production, prevalent in the weaving and textile sectors (often within the unorganized or MSME framework). In this arrangement, the production process is decentralized, involving a relationship between a merchant and artisans (weavers).
Statement-wise Analysis:
- Statement 1 is Incorrect. Under the putting-out system, the weavers do not purchase the yarn from the open market. Instead, the merchant supplies the raw material (yarn) to the weavers. This arrangement saves the weavers from investing capital in raw materials but creates dependency on the merchant.
- Statement 2 is Correct. The weavers process the raw material provided by the merchant and convert it into finished cloth. They are paid for their labor (wages) by the merchant upon the delivery of the finished product.
- Statement 3 is Correct. Once the weaving is complete, the finished cloth is collected by the merchant. The merchant then sells this cloth to garment manufacturers or traders. The weaver typically does not have direct access to the final market.
Key Takeaway:
The defining feature of the putting-out system is that the merchant controls both the supply of raw materials and the market for the finished product, while the weaver provides the labor and tools (looms) in exchange for wages.