1 BIZ BITS PRODUCTION Production is the process of making and supplying goods and services in order to satisfy people s needs and wants through the offer of a large variety of products. Goods are any tangible and movable personal property which is the object of a business transaction. They can be divided into: capital goods, which are goods used to produce other goods, such as raw materials or industrial machinery. They do not satisfy needs or wants directly. consumer goods, which are goods for everyday use such as food, clothing, or electrical devices. They satisfy needs and wants directly. Another distinction can be made between: non-durable goods, which are consumed soon after they are bought or just used once such as food or newspapers durable goods, which have a longer life and can be used repeatedly, such as furniture or clothes. Services are non-physical products such as education, entertainment, transport, or tourism. Needs are necessities for the survival of people, animals or organisations, i.e. things we could not live without, such as water or food. Wants are desires, i.e. everything that is not essential but that can make our lives easier or happier, such as a new car or a TV set. The production process can be divided into three parts: INPUT: raw materials and machinery TRANSFORMATION PROCESS OUTPUT: finished goods and services The factors of production are the resources needed to produce goods and services. They are: LAND LABOUR CAPITAL ENTERPRISE The production site and all the natural resources above or below the surface (e.g. air, sunlight, trees, soil, minerals, etc.) Its reward is the rent. The human input in the production process. Its reward is wages. High skilled professionals working for a company are defined as human capital. All man-made resources: monetary resources or other assets such as machinery and equipment. Its reward is the interest. The combination of the other three factors by entrepreneurs, i.e. people with original and innovative ideas. The reward is the profit. The three major sectors of production are: PRIMARY OR EXTRACTIVE SECONDARY OR MANUFACTURING TERTIARY OR SERVICES The extraction and production of raw materials from nature without any processing. It includes: mining, forestry, farming, fishing and husbandry (i.e. breeding and raising livestock) The transformation of raw materials into finished or semi-finished products. It includes: manufacturing, building and construction, the generation of power and the production of petrol. The provision of services. It includes: personal, commercial and social services. The quaternary sector is the part of the tertiary sector which refers to intellectual activities such as ICT. The interdependence between the sectors is known as the chain of production. 282 APPENDICES