The document summarizes the factors of production (land, labor, capital, and enterprise) and how businesses transform these inputs into goods and services through the production process. It discusses improving efficiency, classifying outputs as primary, secondary, or tertiary, and measuring value added through production.

1. Transforming resources into
goods and services
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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!