Stages of Production

Production means producing goods and services so that we can satisfy our wants. Any type of production is an economic activity. It is useful to classify the economic activities according to the nature of production they do.

Primary Economic Activities

Also known as the extractive industry, primary economic activities involve in extraction of natural resources. Firms which produce natural resources are called primary firms. Fishing and agriculture are good examples of primary economic activities in Maldives. Other examples in this sector include, mining, extraction of crude oil and logging. The output of the primary industries are usually input for the secondary industries.

Secondary Economic Activities

Secondary sector involves in the use of raw materials to make other goods. Secondary production is also known as ‘manufacturing’. While the normal fishermen catching fish from the sea is a primary economic activity, the fish cannery in Felivaru is in secondary sector of the economy. Any firm which manufactures by using primary goods or secondary goods from another firm as raw materials is doing secondary production. Other world examples include, manufacturing cars, ship building and refining oil etc.

Tertiary Economic Activities

Once primary and secondary industries complete their production of goods, there are activities necessary to bring them to the consumers. These activities are also called services. For example, travel boats from the agricultural islands bring farm products to the local market.
There are also support services which support the primary and secondary sector. For example, banking and insurance.
Tertiary sector involves in giving services. This is also called service sector. Tourism, which is the major economic activity in Maldives is a tertiary economic activity. Other tertiary economic activities in Maldives include, shipping, teaching, wholesaling and retailing.

Next Topic: Economic Systems

Factors of Production

Factors of Production are the resources used for the production of goods and services.

Production is known as any type of activity that has an economic value. Any activity that generates money or income.

Land

In Economics, land has a wider meaning compared to the English meaning of the word ‘land’. In economics, land consists of all the natural resources. For example, the atmosphere, the seas, soil, everything on the seabed etc.

The price given for the land is usually called ‘rent’

Labour

Labour is the all human efforts in the production. Labour does not only mean the labourers in an industrial site. If we take an example of a tourist resort, labour includes the receptionists, bell boys, bartenders, waiters, admin assistants, telephone operators etc.

The price given for the labour is usually called salaries and wages

Capital

Capital is the investment given to the business by the owner. It includes money input by the owner plus the fixed assets such as machinery and tools used for the production.

The price of the capital usually is interest payments.

Entrepreneur

An entrepreneur is a person or a group of people who bring together all the other factors of production. For example, the manager in a company gives direction to the plumbers, supervisors, admin assistants. He also manages the finance in the business and thinks of ways of increasing profit. The manager here is the entrepreneur.

Next Topic: Stages of Production