THE PRODUCTION PROCESS What is production? Production is the process of taking raw materials and transforming them into useful goods and services. The raw materials used in the production process are known as resources or factors of production. The production process consists of three stages: • Primary stage of production https://www.youtube.com/watch?v=aYhEbjhhcAg • Secondary stage of production https://www.youtube.com/watch?v=V83rdbSpiGA • Tertiary stage of production Complete Activity 12.2 – Page 149 Inputs and outputs Inputs, also known as the factors of production, are the resources used in the production process to make goods and services. There are four groups of factors of production: • • • • Natural resources – land Labour Capital Entrepreneurs Complete Activity 12.3 – Page 151 The outputs of the production process refer to the products that the business produces. There are two kinds of outputs: • Goods • Services Sustainable use of resources Resources are scarce – there are a finite number of them. • Renewable resources • Non-renewable resources Sustainability Refers to the process of using resources in such a way that we do not run out. Strategies to make sustainable use of resources: • R • R • R Meaning of economic growth Economic growth is a process that occurs when there is an increase in the quantity of goods and services produced. Currently South Africa’s economy grows at a rate of 3% per year. Complete Activity 12.5 – Page 154 Economic growth can be achieved by making better use of the four factors of production. Strategies to stimulate economic growth: • • • • Promotion entrepreneurship and encouraging new small businesses. Encouraging existing businesses to expand and increase production. Improve productivity to produce more goods and services. Change production techniques to make more effective to increase output. Results of economic growth: • More goods and services for consumers to choose from – more variety. • Employment levels rise and unemployment levels drop – reduces poverty. • Level of income increases because people profit from sale of more goods. • Standard of living improves – more jobs – more money circulated in the economy. Productivity Definition Complete Activity 12.7 – Page 156 – Numbers 1 a - c Increasing productivity refers to the process of improving the use of resources to get more out of them so that more goods and services can be produced. Strategies to improve productivity: • • • • Improving the motivation and morale of workers. Improving their level of skills. Using incentives to reward employees. Make use of leadership and management skills to monitor and control employees. Improvements in productivity lead to economic growth in the country, which leads to improvement in the standard of living. The effect of productivity on economic growth When the productivity of labour is low, there is: • a waste of resources • a decrease in the level of output • a decrease in economic growth. Improvements in labour productivity lead to: • workers being well educated and trained • improve the health status of workers • workers being well motivated • compel employees to go to work except when they are sick. Increase productivity of natural resources (land)by: • educating people about sustainable use of resources • passing laws to prevent exploitation of natural resources • encouraging people to use natural resources responsibly. Technology in the production process Definition Advantages Disadvantages Contribution of technology to improving productivity and economic growth • Technology enables humans to do things faster and better. • Technology improves efficiency – and effectiveness • Technology enables businesses to produce more goods which gives rise to economic growth. • Technology can increase productivity and result in an increase in the levels of production. • Technology can lead to economic growth but increased levels of unemployment when people are replaced by machines. • Technology can have a negative impact on productivity when it causes people to be distracted from their work (Facebook, social media).