Economic and Management Sciences
Entrepreneurship
THE PRODUCTION PROCESS
Grade 7 - 2021
1
Types of Businesses
Trading Businesses
Manufacturing
Businesses
”
SELLIN PRODUCING
Consumers and Producers
Consumers Producers
Buy and use goods Make/Sell
and services goods and service
Definition of
Production
Production is:
• when inputs (raw
materials)
• are transformed
• into outputs
(finished goods
or services).
3 Stages of Production
Primary stage of production
• During the first or primary stage of
production, natural resources are
taken from the earth.
• The primary sector is made up of
businesses that are involved in the
first stage of production. These
businesses are called extractive
industries because they often
extract things such as crops or
metals from the ground.
3 Stages of Production
Secondary stage of production
• Products are manufactured from the
natural resources extracted in the
primary stage.
• Businesses in the secondary sector of
the economy process the primary
sector of production and turn the
natural resources into finished goods.
Tertiary stage of
production
• The third stage is done by
businesses that provide a service
rather than make goods.
• Some tertiary sector businesses
buy goods from manufactures and
transport or resell the goods to
consumers.
• Other businesses in this sector
offer services to individual
persons such as healthcare,
banking or transport.
• Examples of businesses in the
tertiary sector includes: shops,
transport companies, doctors and
banks.
Inputs
• Inputs is an economic term covering all the materials, time, money, energy and
ideas that go into making a good or offering a service
• These things that they use to produce their products are called inputs.
• These inputs are called factors of production.
• Four factors of production are needed: natural resources, labour, capital and
entrepreneurship.
Factors of
Production
Capital
Capital refers to all man
-made aids that are
used in the production
process.
The tools and machinery,
such as the saw, the
hammer and the drill,
which carpenters use
are all types of
equipment or capital
and form part of the
inputs.
Interest
Natural Resources
Factors of Production
Natural resources refer to all
items obtainable from nature.
Inputs include a variety of
different raw materials which
all come from land.
Raw materials are wood, coal,
iron ore, gem stones, fresh
produce or semi-produced
materials like cut planks, gold,
cut and polished gem stones,
electronic parts.
These raw materials are
combined to make the product.
Rent
Labour
In production there is a
cost for all work, which is
usually called labour.
Labour is all human
effort, mental or
physical, for reward.
Labour is a very
important input which
often costs more than all
the other inputs.
Wages / Salary
Entrepreneurship
Factors of Production
Entrepreneurship is the engine that
drives he business and production
process.
Without the vision, skills and energy of
the entrepreneur there would be no
business, no production process, no job
opportunities and no goods and services
for consumers to buy.
They bring the other factors of
production together and turn them into
a business.
Entrepreneurs are creative and willing
to take risks,
But they plan carefully and try to make
smart decisions to make a profit and
reduce the risks.
They cannot be reckless because there
is always the possibility of a business
failing.
Profit
Output
• Outputs are created as a result of the production process
• They include all the goods and services that are produced during the
production process and all the waste that is produced.
Factory
Let’s discuss
Inputs? Process?
Output?
Economic Growth
Economic growth
Economic growth means the rate at which the economy of a country is
increasing or possibly even decreasing over a period of time.
If the economy of the country is producing more goods and services this year
than it did last year then we can say that the country is experiencing positive
economic growth.
If the amount of goods and services produced decreases, then we say that the
country is experiencing negative economic growth.
Economic Growth - GDP
The gross domestic product (GDP) is used to measure the economic growth of
a country.
GDP = the total value of all f inal goods and services produced in a country in a
year.
When GDP increases, it means the economy is growing.
The GDP is measured as a percentage (%) of the previous year’s GDP.
Recession: A diff icult time when economic activity decreases and economic
growth is low or negative
GDP – Gross Domestic Product
Currently, ALL countries in the world is in a recession due
to Covid-19 (no tourism, restrictions, disinvestment)
Our economy is Covid – 19,
growing but slower Our economy was South Africa is in a
and slower every growing every year, recession
year although it was
slower every year
Advantages of
Economic
Growth
Advantages of economic growth:
leads to higher standard of living
stimulates higher employment
increases taxes so that the government
has extra money to spend on projects
such as building infrastructure
encourages investment in capital goods,
such as machinery, which in turn helps to
keep up economic growth
usually increases profits for businesses
and builds business confidence.
Disadvantages of Economic
Growth
Disadvantages of economic
growth:
• an increase in inflation
• a negative impact on, or
damage to, the environment
because of higher production
and consumption. This can lead
to pollution, road congestion,
more solid waste and the
destruction of forests.
Productivity
Meaning of productivity
Def inition: Productivity
is the number of goods
and services a business
produces in a set period
of time.
Productivity
The longer it takes to produce something, the greater the cost because
‘time equals money’.
Low productivity is one of the most common reasons why businesses fail.
The productivity of a worker is measured by the number of goods or
services that the worker or team of workers produce in a certain period
of time.
The quality of products produced has an influence on productivity –
although a business that produces high-quality products makes fewer
products, the business may be more productive because they sell their
products for a greater prof it than a business making poor-quality
products.
Improving
Productivity
Factors that can improve productivity:
Good management
Better education and training
Better working methods and improved
technology
Division of duties – instead of each
worker producing a whole product, the
production process can be broken down
into a number of tasks. Each worker does
one task and this speeds up the
production process.
Specialisation – workers should do tasks
that they are the best at.
Low
Productivity
Reasons why productivity is low:
o inefficient and poorly
managed businesses
o a lack of skills and training in
the labour force
o a lack of investment in new
businesses
o high levels of poverty
o crime and high levels of
corruption.
Measuring Productivity
• The productivity of a worker is measured by the number of goods and services
that the worker or a team of workers produce in a certain period of time.
• The more products produced or the higher the output the more productive a
worker is.
Who is the most productive?
60 minutes, 11 breads,
11 muffins 60 minutes, 6 muffins
Technology in the production process
Technology is the use of machinery and modern
equipment such as computers and robots in the
production process. Today machines play a big part in
our lives and in the production process.
Technology is used for the following purposes:
• manufacturing – many different types of
machines are used in factories to increase and
speed up production
• transporting goods – cars, trucks, trains, airplanes and
ships are all forms of technology that are used to move
resources and products from sellers to buyers.
• communication – telephones, computers, fax machines,
scanners and cellular phones are essential items in almost
all businesses these days
• advertising – which is also a form of communication,
makes use of all of the above technology as well as
television, radio and film
• packaging – most products are packaged and much of this
is done using machines
• primary activities – farmers, fishers, miners and
foresters all use machines and other forms of technology
o make work easier and more efficient.
Areas where technology has helped to improve productivity:
• electronic banking has speeded up banking processes
• faster transport means goods are delivered quicker
• internet and electronic communications make
international trade easier
• robots make assembly line production quicker and more
reliable
• greater output of goods or services can be achieved.
• production has become cleaner and safer – ‘green
technology’ produces less waste and uses less fossil fuels
..
However, using modern technology has also had some bad side effects:
• pollution has increased, many rivers are contaminated
through factory waster getting into them
• factory smoke cause environmental damage
• people sometimes lose their jobs when machines or robots
replaces them.