1. By: Kim Delisser

3. Definition:
1. The creation of goods and services to satisfy
human wants.
2. The act of producing; creation; manufacture.

4. Production is said to take place when input
changes to output.
Primary human needs are
food, shelter, clothing, etc. along with secondary
(social) needs and tertiary needs (achievement or
self-esteem). These are examples of goods and
services that persons would find it difficult to

6. The levels of production basically
describes the manner in which people wants and
needs are satisfied.

7. Traditional or Subsistence Production
Domestic or Local Production
Surplus or Export Production

8. This is known to be the basic level of
production. This level I where people sought to
provide for just their basic survival, no more, no less
such as food, clothing and shelter. It is said that this
level of production was mostly practiced by tribes
and that they find it difficult to survive during
floods, drought, etc..

9. An example of traditional production
would be: members of a family that do
farming, fishing, and so on just to fed his/her
family members only. They do not provide for
persons who they are not related to.

10. This is the level of production that uses local
inputs such has: land, labour, capital and enterprise. It
is the production of goods and services for the needs
of the family and the country. It is the trading of goods
within the country, and is very important because it
enables a country to rely on its own resources rather
than import from other countries.

11. An example of domestic production is a
local farmer who produces root crops like
yam, potato, and so on, but also citrus fruits and
bananas for his family and for his/her country
has well.

12. This is the level of production that is over
and above the domestic needs of a country and
is a feature of mature or developed economies.
The needs of the family, country and exports are
satisfied.

13. An example of surplus production would
be where an organization produces goods for the
country and its people as well as for exports.

15. The factors of production are resources
required for the manufacturing for the different
types of goods or services in the attempt to make
an economic profit. They are said to be rewarded
for the contribution that they make towards
production.

16. Land
Labour
Capital
Entrepreneurship

17. This factor of production refers to the land
itself and its natural resources that it
offers, including the sea. It can therefore be
referred to a free gift of nature and is considered
the most important factor of production.
Hence, without land production would not be
able to occur.

18. One should bear in mind that these natural
resources comes from above and below the earth.
Land can further be subdivided into renewable
and non-renewable resources.

19. Renewable resources are resources that can
be replaced as quickly as it is used. Continually
replaced. Examples are:
trees, fishing, agriculture, forestry, and so on.

20. Non-renewable resources are resources that
cannot be replaced after they have been used.
Cannot be replaced after being consumed.
Examples are: bauxite, oil, coal, and so on.

21. Renewable Resources Non-Renewable Resources
Trees Bauxite
Fishing Oil
Agriculture Coal
Forestry Limestone
Water (by nature e.g. rainfall) Asphalt (pitch)
Diagram 1: Examples of renewable and non-
renewable resources.

22. This factors of production refers to the
human inputs of work to produce the goods and
services. The power to work; human effort of
any kind that can either be manual (working with
the hands such as carrying, cutting), or mental
(using the brain such as trading, accounting).

23. It involves the physical and mental efforts of
individuals as the convert natural resources in
finished goods and services. Labour can be
classified as: unskilled, semi-skilled, skilled and
professional.

24. There is no special ability required to
perform tasks, examples, men who carry blocks
and buckets on cement on a construction site.
Examples are: dishwashers, garbage men, shop
keepers, and so on.

26. The ability and skills to do a particular task
is only partially developed. Examples are:
nurse’s aide, waiter/waitress, and so on.

28. There is a special ability to do a particular
job. These skills are developed through
specialized training. Examples are:
carpenter, plumber, electronics, and so on.

30. Those individuals with the highest level of
knowledge based education and managerial
skills with a bachelor’s degree or diploma.
Examples are: teachers, bank managers, and so
on.

33. Level of education and training of worker:
This makes it easy or difficult to train a person.
a trained person is said to work faster.
Working conditions: If conditions are ideal,
layout of the work place (enough space). Are
workers comfortable abs able to get something
to eat on the premises.

34. Motivation: Is there rewards such has a bonus
that workers will want to work harder for. An
incentive. Are employers motivating workers?
Attitude to work: If persons are responsible
and show effort in the tasks given to them, thus
increase productivity.

35. Health of the workers: A health worker
produces more than an unhealthy worker.
Good management: If managers place workers
in areas that best suit their ability, then level of
production will increase, resulting that
productivity will rise

36. This refers to the persons who are either
employed or seeking employment. It depends on
the number of workers available, hours
offered, and wage paid.

37. Size of the population: Large populations are
said to have a greater percentage of
supply, than a small population would.
Age distribution of the population: If the
population is too old (mostly retired or near
retirement), or too young (of school age)
means that the labour force mat be small.

38. Too much women: If the population is mostly
of females who would have to stay home and
look after the children and maintain the
house, then the supply of labour will reduce.
Especially in countries where women are not
allowed to work.

39. This refers to resources such as money and
other assets that are necessary in the process of
production. Capital includes: buildings,
machinery, stock, money, and so on. Things that
are needed in the day to day operation of the
business. Capital can be divided into physical
capital and social capital.

40. Physical capital consists of:
Fixed Capital
Working Capital
Financial Capital

41. This refers to capital that is long lasting
and does not change in the course of production.
They are repeatedly used in the operation
process and the creation of wealth. Examples,
buildings, machinery, tractors and so on.

42. This refers to capital that changes in the
course of production. Things that are needed for
the day-to-day running of the business that are
constantly used up in the process. Examples, raw
materials, cash, and so on.

43. This refers to money capital which the
company uses to run its day-to-day operations. It
consist of loan capital and share capital.

44. Other than private investments, there are
public investments that takes the form of
government expenditure on factories, plant,
machinery, or on roads, airports, utility and so
on.

45. Entrepreneurship is said to be the fourth
(4th) factor of production. This refers to a person
who coordinates all the factors of production
(land, labour, and capital) in order to produce
goods and services. We can all agree that the
other three (3) factors are important in the
process of production, but without an

46. entrepreneur to organise these factors, production
could can have been achieved or achieved more
efficiently. Entrepreneurs are said to be the
owner of a business and it is their role to take on
risks of the business. Also to make decisions that
will ensure that the business makes a profit.

47. To raise capital.
To ensure that all the factors of production are
being used correctly.
To identify and clarify decisions related to the
business.
To take risks by entering the market place.

48. To make any changes that are necessary
towards the growing of the business.
To organize the different types of labour
required.

50. There are different types of productivity
activities that are carries on in the region. There
are known to be three (3) different types of
production.

51. Extractive or Primary Production
Manufacturing and Constructive or Secondary
Production
Services or Tertiary Production

52. This involves the extract of raw materials
from our surroundings or nature. The primary
stage of production or goods in the raw state.
Examples, agriculture, mining, quarrying and so
on.

53. This is the secondary stage of production
involves the transformation of raw materials into
finished or semi-finished goods. Manufacturing
is the state where primary goods are changed.
Examples, bauxite into alumina, mining of oil
into gasoline, trees into wood and so on.

54. Constructive production is also known to
be secondary production, where manufacturing
goods are assembled. For examples, the building
of houses, roads, and so on.

55. This is concerned with the provision of
services (direct or indirect). This refers to
commercial services for goods and services to
reach buyers. Examples, transportation, gas
stations, and so on.

56. Primary Secondary Tertiary
Trees Hood Building of houses
Asphalt Road building Transportation (taxi)
Cotton Clothing Sales at a store
Agriculture Processed food Restaurants
Sugar cane Rum Sales at a bar
Diagram 2: Examples of the different types
of production, and how each are linked.

57. Goods are tangible commodities, which
satisfy human needs and wants, while services
are intangible things which satisfy human needs
and wants has well, that are not visible to the
eye, but can see their results.

59. These are industries that are connected
together, in that the finished products of one
industry becomes the raw material or semi-
finished goods of another industry. When one
industry is dependent on another industry’s
output as an input to its own.

60. Linkage can either be backward or
forward, and can involve an industry in primary
production linking with an industry in secondary
production.

61. This occurs when the demands on an
industry lead to the establishment of other
industries to provide for the needs of this
industry. The growth of an industry leads to the
growth of the industries that supply inputs to it.

62. An example of a backward linkage industry
is where the producer of baked goods find it
necessary to be in contract with an egg form for
the supply of eggs.

63. This occurs when the demands on an industry
finished goods depends on the needs of consumers.
An industries finished goods becomes the raw goods
of another industry in order to satisfy customers.
The growth of an industry leads to the growth of
other industries that uses its output as input.

64. An example of a forward linkage industry
is where the producer of the baked goods sells
his finished goods to consumers through the
distribution channel process.

65. Egg Farm
(Backward Linkage)
Pastry Factory
(Forward Linkage)
Supermarket
or
Restaurant
Diagram 3: Example of the linkage industries
within the economy.

66. Advantages
 Employment is created at all
levels.
 Local raw materials are put to
efficient use.
 They can lead to valuable
foreign exchange earnings.
 They promote regional co-
operation and prosperity.
Disadvantages
 Access to foreign markets is
not guaranteed.
 Availability of raw materials
in some cases are limited.
 Loans from multilateral
landing agencies are only
provided for infrastructure
development.

67. Advantages
 The contribute to the skilled
labour pool in the country.
 Can encourage large scale of
production and may meet
the domestic as well as
export demand.
Disadvantages
 Heavy machinery is
expensive to buy and set up.
 Shortage of venture capital
to extract raw material, start
manufacturing and carry out
successful export marketing.

68. Website links for further reading
http://www.bized.co.uk/educators/level2/busactivity/activity/production12.htm
http://www.ehow.com/list_6403223_four-factors-production-economics.html