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Transforming resources into
    goods and services
           Bus1
Resources (inputs)

 Land                          Labour


              Factors of
              production

Capital                    Enterprise
Factors of production
Land
As well at the businesses’ location, this includes all the natural
resources that can be used for production e.g. coal, oil, livestock
etc.


Labour
This describes both the physical and mental effort involved in
production. For example, accountants, window cleaner and
those providing manual effort in producing finished goods
Factors of production
Capital (this can have different meanings, be aware!)
This means goods that are made in order to produce other goods
and services. For example, machinery, computer systems,
shelving and lorries etc.

Enterprise
This is the act of bringing together the other factors of
production in order to create goods and services. It is carried out
by the entrepreneur, who makes decisions and provides finance.
Improving the efficiency of the factors
             of production
Improving the fertility of land   Improvements in
                                  entrepreneurial skills and
Using renewable or recyclable     risk taking
resources
                                  Combining the factors of
Greater education and training    production in a balanced
of the workforce
                                  way
Increasing the level of
investment capital equipment      Extending the overall scale
                                  of production
The nature of output
  The process by which inputs of factors of production
 are transformed into outputs is known as production
• Customers may be other businesses
• Customers may require a service rather than a good
• The vast majority of production in the UK is in the
   form of services


                     Transformation
   Inputs                                   Outputs
                         process


                           Feedback
The transformation process
• Some inputs are used up however other may remain
  intact- raw materials are used up, capital equipment
  remains intact

• Land , labour and enterprise will remain active

• The business must be careful not to over these resources
  as it may lead to lower efficiency

• In the tertiary sector it focuses directly on the consumer-
  no physical product emerges
Classifying outputs
• Natural resources
• Semi-finished goods
• Services

These are referred to as primary, secondary and
tertiary production
Production in the Primary sector
• Natural resource

• Transformation process is quite simple

• Example: agriculture- the converting seeds into crops

• Can involve extraction, e.g. gold or coal

• Extraction of some resources can be expensive
Production in the Secondary sector
• Converting primary goods into finished goods

• These finished goods may act as an input for other
  businesses

• For example- Michelin purchases a primary product-
  rubber- as the main component in making tyres,
  subsequently these tyres may be one of the inputs
  into a car made by Volkswagen
Production in the Tertiary sector
• Services- commercial or personal (sometimes can be
  both e.g. banking)

• Transformation processes produce goods and
  services e.g. a restaurant

• As well as goods/services the production process can
  lead to undesirable outputs such as waste and
  pollution
Measuring output
Example:
Toyota produces a car that is sold for £12,000-
the value of its output is £12,000?

The parts of the car may have been manufactured by
another company, therefore the true value of the car is
its selling price minus the value of the goods/services
bought in by Toyota. This is known as added value
Adding value
• Production is seen to be a major factor in adding
  value

• Marketing can also add value- USPs or an attractive
  mix of design, function, image and service

• Brand awareness and consumer loyalty

• In order to make a profit, businesses need to add
  value!

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Transforming resources into goods and services

  • 1. Transforming resources into goods and services Bus1
  • 2. Resources (inputs) Land Labour Factors of production Capital Enterprise
  • 3. Factors of production Land As well at the businesses’ location, this includes all the natural resources that can be used for production e.g. coal, oil, livestock etc. Labour This describes both the physical and mental effort involved in production. For example, accountants, window cleaner and those providing manual effort in producing finished goods
  • 4. Factors of production Capital (this can have different meanings, be aware!) This means goods that are made in order to produce other goods and services. For example, machinery, computer systems, shelving and lorries etc. Enterprise This is the act of bringing together the other factors of production in order to create goods and services. It is carried out by the entrepreneur, who makes decisions and provides finance.
  • 5. Improving the efficiency of the factors of production Improving the fertility of land Improvements in entrepreneurial skills and Using renewable or recyclable risk taking resources Combining the factors of Greater education and training production in a balanced of the workforce way Increasing the level of investment capital equipment Extending the overall scale of production
  • 6. The nature of output The process by which inputs of factors of production are transformed into outputs is known as production • Customers may be other businesses • Customers may require a service rather than a good • The vast majority of production in the UK is in the form of services Transformation Inputs Outputs process Feedback
  • 7. The transformation process • Some inputs are used up however other may remain intact- raw materials are used up, capital equipment remains intact • Land , labour and enterprise will remain active • The business must be careful not to over these resources as it may lead to lower efficiency • In the tertiary sector it focuses directly on the consumer- no physical product emerges
  • 8. Classifying outputs • Natural resources • Semi-finished goods • Services These are referred to as primary, secondary and tertiary production
  • 9. Production in the Primary sector • Natural resource • Transformation process is quite simple • Example: agriculture- the converting seeds into crops • Can involve extraction, e.g. gold or coal • Extraction of some resources can be expensive
  • 10. Production in the Secondary sector • Converting primary goods into finished goods • These finished goods may act as an input for other businesses • For example- Michelin purchases a primary product- rubber- as the main component in making tyres, subsequently these tyres may be one of the inputs into a car made by Volkswagen
  • 11. Production in the Tertiary sector • Services- commercial or personal (sometimes can be both e.g. banking) • Transformation processes produce goods and services e.g. a restaurant • As well as goods/services the production process can lead to undesirable outputs such as waste and pollution
  • 12. Measuring output Example: Toyota produces a car that is sold for £12,000- the value of its output is £12,000? The parts of the car may have been manufactured by another company, therefore the true value of the car is its selling price minus the value of the goods/services bought in by Toyota. This is known as added value
  • 13. Adding value • Production is seen to be a major factor in adding value • Marketing can also add value- USPs or an attractive mix of design, function, image and service • Brand awareness and consumer loyalty • In order to make a profit, businesses need to add value!