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Objective 1 Identify factors in the production of goods and services

Factors of Production:
a) Land also called natural resources. (e.g. bauxite, oil, gold and diamonds, rivers
and lakes)

b) Labour also called human resources. Labour is divided as follows:

Skilled engineer, computer operator, doctor, teacher

Semi-skilled driver, domestic servant, data entry operator, plumber, mechanic
Unskilled watchmen, vendor, labourer

Labour-intensive firms use more people and less machinery whereas

capital-intensive firms use more machinery and technology, and fewer people

c) Capital also called man-made resources. Capital refers to money and all other
assets employed in the process of production such as building, machinery,
equipment and stock.

Capital may be fixed, that is, items that remain in the business for a long time such
as plants and machinery.

Capital may also be in the form of working capital, that is, items that are used in
the day-to-day operations of the business, e.g. raw materials, stock, cash and bank
balances

d) Enterprise or entrepreneurship owners and entrepreneurs take risks, raise

finance, employ and coordinate factors of production and ensure they are
efficiently used.
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Objective 2 Identify industries developed from the natural resources of

Caribbean territories

COUNTRY NATURAL RESOURCES RELATED INDUSTRY OWNERSHIP

T&T ASPHALT ASPHALT STATE

OIL PETROLEUM, STATE

PETROCHEMICAL
NATURAL GAS ENERGY STATE &
MULTINATIONAL

SUN, SEA, SAND TOURISM STATE & PRIVATE

CLAY CONSTRUCTION STATE & PRIVATE

COCOA FOOD/COCOA PRIVATE

JAMAICA BAUXITE ALUMINUM STATE & PRIVATE

GYPSUM CONSTRUCTION PRIVATE

MARBLE CONSTRUCTION PRIVATE

GUYANA BAUXITE ALUMINUM STATE

FORESTRY CONSTRUCTION STATE & PRIVATE

GOLD, SILVER JEWELLERY PRIVATE

Fig 5.0 Diagram showing natural resources from each country & their ownership
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Objective 3 Differentiate between production and productivity

What is production?
Production is the act of creating or manufacturing something.

What is productivity?
Productivity is efficiency. That is how well the business is using all of its resources.
In other words, productivity is the relationship between the amount of human and
other resources used and the amount of output that is produced.

Productivity = Output (goods & services)

Input (workers, money, machines, raw materials)

Labour productivity = Output (goods & services)

No. of employees

Productivity levels must be high if the business is to be profitable and therefore

productivity is very important. When productivity is low, the business will make little
or no profit.

Objective 4 Explain the importance of productivity

The importance of productivity to:
Human resources comprise the labour force which is all the mental and physical
efforts used in the creation of goods and services. The higher the labour
productivity, the more efficient the employees are working in a business.

Value and importance of labour Human resources are the most important
asset in a company required for accomplishing its goals. The production of goods
and services requires some form of labour. Labour intensive firms use more
people and less machinery whereas capital intensive firms use more machinery
and technology and fewer people. People are mainly used to monitor the
process.
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Factors affecting the labour supply

Many factors are affecting the quantity and quality of labour available in a
country. These are:
a) Rate of growth of the population if the population is growing and migration
is constant then the labour supply in the country will increase.

b) The structure of the population an ageing or very young population would

mean a smaller labour supply.

c) Cultural patterns if women are not allowed to work the availability of labour
will be adversely affected.

d) Economic conditions in some countries the family wage may be sufficient and
thus wives may not be required to work.

e) Mobility of labour the movement of people to another place to work will

affect the labour supply. People tend to move to areas with greater amenities
such as good schools, recreational and shopping facilities.

f) The quality of the labour force if the population has the appropriate skills
and is healthy this would be reflected in the labour force.

g) Educational policy and health of the nation if the training period of

individuals is long then a smaller population would be available to form the
labour force. If the government decides to extend tertiary education to more
persons, then fewer would also be available to work. With better health
facilities individuals would spend fewer days away from their jobs because of
illness.

h) Migration patterns migration has been both internal and external. Internal
migration is the movement of people within a country. For example, from rural
to urban and vice versa. External migration however is the movement of people
from one country to another which is more developed, to experience a
perceived better standard of living or lifestyle such as the United States.
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Methods used to improve the productivity of labour:

Improve education and skills training
Making more employees specialize in a particular skill
Increasing wages and other financial incentives
Improving the management functions such as motivating, instructing and
delegating
Improving the health of workers by providing health care benefits
Improving working conditions

Objective 5 Explain the role of capital in production

cing other goods:
Both fixed and working capital is required for production and can be very expensive and
must be used very efficiently.
To undertake production that labour would not complete promptly (e.g. deep-sea
drilling). This requires some form of technology or machinery to get the job done.

Objective 6 Differentiate amongst types of capital

Types of capital:
a) Fixed capital items that remain in the business for a long time. (e.g. plant and
equipment, machinery)

b) Working capital items that are used in the day-to-day operations of the
business. (e.g. stock, cash)

c) Venture capital a type of financing that investors provide to startup businesses.

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Objective 7 Classify the different types and levels of production

a) Types of production:

i. Extractive (agriculture, mining, fishing) Also called primary production is

an activity that involves extracting from our natural resources. It is the first
stage of production.

ii. Construction (building) Also called secondary production and is the

second stage of production. It involves using raw materials to be converted
into finished goods.

iii. Manufacturing (assembling, refining) Another form of secondary

production where raw materials are used to assemble products or refine
into finished goods and services.

iv. Service (transport, communication, tourism) Also referred to as tertiary

production and can be a direct service (serving fish) or commercial service
(transporting fish). This is the final stage of production.

b) Levels of production:

i. Subsistence Geared towards satisfying basic needs. Most persons are

engaged in agricultural activities and produce just enough for a person and
his family. Production is not very efficient.

ii. Domestic consumption At this level, surplus goods and services are used
within the domestic or national community. This stage does not involve
any imports or exports.

iii. Surplus At this level, countries can produce for the domestic community
and still have excess or surplus production. Usually found in countries with
large supplies of raw materials and advanced technology.

iv. Export At this level trade develops with other countries due to excess
production. The export level should be the aim of all producers due to the
level of foreign earnings that can be obtained.
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Objective 8 Describe the characteristics of cottage industries

What is a cottage industry?
A cottage industry is a small firm or business that produces a good or service by
using simple technology. This production was traditionally carried out in the home.

Today they are found in community centres, parish halls and small entrepreneurial
estates.
Characteristics of a cottage industry:
Home-based
Mainly manual
Small scale
Use of local raw material
Use of family members as labour

Objective 9 Outline the functions of small businesses

The following are considered when describing a small firm:
The amount of capital invested
The number of employees (usually 1 -10)
The gross sales or receipts (in T&T a small firm with less than $250,000 in gross
annual receipts or sales)
The land space available

Functions of small businesses:

1. Create employment

2. Provide services that large firms are not willing to produce

3. Niche markets (a subset of the market on which a specified product is focused; a

small market segment)
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Objective 10 Discuss the advantages and disadvantages of small business

Examples of advantages
Generate employment and income especially and rural areas and economically
depressed areas
Increased competition for larger firms
Introduce new products and ideas

Examples of disadvantages
The business lacks expertise in certain areas
Owners find it difficult sourcing finance from financial institutions
Limited ability to service customers due to unavailable resources

Objective 11 Explain how a business grows internally and externally

Examples of internal growth:
a) Opening other outlets

b) Employing more workers

c) Increasing capital

Examples of external growth:

a) Joint ventures (a business arrangement in which 2 or more parties agree to pool
their resources to accomplish a specific task or goal)

b) Mergers (an agreement that unites 2 existing companies into one new company)

c) Takeovers/acquisitions (a takeover is a special form of acquisition that occurs

agreement)
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Objective 12 Outline the opportunities for and benefits of developing linkage

industries
What are linkage industries?
Linkage industries are industries that are connected with other industries in which
the output (finished product) of one becomes the input (raw material) of another.
The linkage may be backward or forward. Another word for a linkage industry is a
spin-off industry.

Linkage industries foster stronger economic ties among regional states. They
create more jobs, improve the skills of the people, and encourage economic
growth and sustained development.

Sugar cane Sugar processor Confectionary (candy) producer

(estate/farm) (manufacturer)
Backward linkage Forward linkage
Fig 5.1 Diagram showing the concept of linkage
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Objective 13 Explain the effects of growth on a business

Growth of a business and effects on:
a) Organizational structure the structure will change and expand due to more
workers such as managers, supervisors and specialists.

b) Labour more workers will be employed due to more activities and

responsibilities.

c) Capital more fixed and working capital will be required and the business may
have to seek other sources of financing.

d) Use of technology more technology will be required to speed up production and

lower total costs.

e) Potential for export as sales increase, the business can change from the domestic
level of production to surplus and export.