Production unit 4
Production is the process of transforming/changing/converting raw materials into
goods and services.
Raw materials-these are unprocessed materials that are directly taken from nature.
Reasons for production/why production is important
• To satisfy our needs and wants
• To earn foreign currency
• Resources are not equally distributed
People needs and wants/differentiate between needs and wants
Needs-these are basic necessities/things that we cannot live without e.g. clean water
Shelter/housing, food, air, clothes, education
Wants-things that we can live without/things we do not need for survival e.g. car,
bicycle, cellphone, TV, radio, pencil, books etc.
Material goods-goods that you can see or touch e.g. water, clothes
Non-material goods- goods that cannot be seen or touched e.g. education, health.
Factors of production
-things that are used to produce goods or services
-things that are needed to produce goods and services.
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Three factors of production
• Land
• Labour
• Capital
Land as a factor of production/explain land as a factor of production
• Land is a natural environment where raw materials or resources are extracted to
produce goods and services.
• Land provides site for buildings
• We use land to grow our crops and graze animals
Land resources
• Water
• Soil
• Wood
• Rocks
• Minerals
Two types of resources
1. Renewable resources-resources that can be used over and over without getting
finished e.g. solar power, hydro power
2.Non-renewable resources-resources that cannot be replaced once they are used up
e.g. minerals and fossils
Who own and access the land?
Private ownership-is when the land is owned by an individual or company
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How private ownership of the land influence the wealth of the country?
Positive influence
• More commercial farms lead to more export and more foreign exchange
• More subsistence farmers produce enough for their families and surplus to the
local market
• Commercial farmers pay tax to the government
• Commercial farmers create jobs
Negative influence
• Land belongs to small group of people-majority are landless
• Commercial farmers focus on export and profit-neglect local needs
• Subsistence farmers produce less/not for selling or export
• Foreign owned land is not used productively
• Land reform may lead to unproductivity
Public ownership-is when the land is owned by the state
Communal land-is when the land is owned by the state and shared by the community
Collective ownership- is when the local people work on the land and get paid while the
land belongs to the government.
Renting-people who farm on the land and don’t own it, they pay the owner in the form
of money.
Sharecropping-is when you pay the owner of the land in the form of crops you are
producing
Landless-means people who have no access to the land.
Labour
Is the work someone does to produce goods and services.
Three types of labour
Skilled labour- workers who went through training and acquire skills and knowledge
Semi-skilled labour-workers that worked along skilled workers and picked up some
knowledge and skills in the process.
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Unskilled labour-people who are not specialised and have little or no training to do the
job.
Division of labour-is breaking/splitting/allocating work to different people.
Specialisation-is when an individual performs a specific task or job over and over until
they become experts.
Specialisation can take place in different ways:
Individual-is the individual that performs a specific task e.g. a teacher
Region- a particular area can concentrate on a major products or services e.g. Erongo
is known for fishing
A country- a country can produce some products for export e.g. Namibia is known for
diamond, uranium, beef, fish etc.
Division of labour in traditional societies, men and women
Men Women
Hunt for wild animals Collect wild fruits (hunters and gatherers)
Look after animals Build shelter (nomadic pastoralist)
Clear the land Cultivate (agriculturalist)
Advantages of specialisation and division of labour
- Increases efficiency/ quality
- Increases output/ quantity
- Improves skills/ to become an expert
- Saves time
- Lowers unit costs
- Less training needed
Disadvantages of specialisation and division of labour
- Creates unemployment
- Leads to boredom and monotony/ absenteeism/ low morale
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- Overdependence on specific skills, which makes people unable to change jobs
- Interdependency - a strike can lead to a stoppage in the production process
- Decline in craftsmanship
- Less pride since workers are not satisfied with the final outcome
- Standard output/ lack of variety/ identical products produced
Suggest three difficulties which may result if a country set up an industry
employing skilled worker only
• Unemployment
• Shortage of skilled labour
• High cost of paying expatriates
• High cost due to break downs and shortages
Capital as a factor of production
Capital is divided into:
Capital goods- are goods/ tools which are used to increase production e.g. machinery,
telecommunication, building, trucks, water, electricity, computer,tools,
computer, fertilisers.
Money capital-is money used increase production
How do we use money in the production processes?
• To buy raw materials
• To pay salary for the workers
• To pay for transport cost
• To pay for water and electricity
• To buy land
• To pay for rent
• To buy capital goods(machinery/trucks)
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Describe ways in which capital goods are used in the production
- Machinery can be used to speed up production and reduce labourers.
- Trucks can be used to transport goods to and from the production site
- Computers to access information
- Buildings to provide the much needed environment for production
(Type of capital good and its usage in the production process)
Types of energy used in the production processes
Non-renewable energy sources-oil
-coal
-nuclear
-natural gas
Renewable energy sources-solar power
-wood
-hydro power
-biogas
-wind power
Advantages of using non-renewable sources of energy.
• Readily available in some areas
• Can generate high amount of electricity required by large scale production
Disadvantages of using non-renewable sources of energy
• Cause high level of environmental pollution
• Not sustainable-will run out
Advantages of using renewable sources of energy
• Often clean energy/does not cause environmental pollution
• Will not run out
• Can support sustainable development
Disadvantages of using renewable sources of energy
• Difficult to generate large quantity of electricity
• Can be expensive to generate and store the energy
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State why transport is needed in production process?
• To transport raw materials to the production site
• To transport finished products to the markets
• To transport workers to the production site
Enterprise and organisation of production
Enterprise-is the process of bringing together the factors of production to produce
goods and services.
Entrepreneur-the person who is organising and brings together the three factors of
production.
Explain/describe how production can be organised.
1.sole trader/individual business
Is when a person raise money from saving or bank loan to start up a business.
Characteristics of sole trader
• The owner raises money from his or her own savings or bank loans
• An individual runs the business
• The owner takes all profit
• You are your own boss
• Require little start-up capital
• The owner bears all risks and loses
• The owner hires workers and pay them a salary
2. co-operatives
Is a group of people with a common goal pulling their resources to increase
production.
Characteristics of co-operatives
-formed by a group of people
-start-up capital is provided by the members
-profit is shared amongst members
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Advantages of being a member of co-operatives
• Save on transport cost
• Share maintenance cost
• Cut on marketing cost
• Access to cheap raw materials
• Buy in large amount/bulks/have more buying power
• Members can bring in experts to advise them
• Large amount of products are sold and so co-operatives get good prices for
members
3. Company
-Is a group of people contributing a share of the capital to start business.
-A business organisation that makes, buys or sells goods or provides services in
exchange for money.
Characteristics of a company
• Raise money by each member contribute a share
• Hire workers
• Choose the managing director, runs and controls the affairs of the company
• Invest money in the business
4. Multinational companies (MNCs)/Transnational Companies (TNCs)
Companies that are found across the world/worldwide and their headquarters are
always in some developed countries e.g. coca cola, puma, shell, Adidas, Samsung.
Characteristics of MNCs
• Operate across the world
• Profit returned to the headquarters
• Operate on a large scale
• Raise money through foreign investors/loans
Advantages of MNCs/why countries should not invite MNCs into their countries
-They provide employment
-They bring in new skills/new technology
-Sponsor sports and give bursaries
-Develop infrastructure
-Their workers’ pay tax to the government
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-Access to the large amount of money
-Access to the world markets
Disadvantages of MNCs/why countries should invite MNCs into their countries
-Profits taken back to country of origin/headquarters
- Increase dependency on MNCs
- Much of production is exported
- Rely heavily on complex technology/capital intensive
- Employ foreign workers in managerial positions
- Low wages to local people
- Environmental damage/exploit (natural) resources/overuse of country’s resources
- Leave any time/close down any time which creates unemployment/when they
repatriate they do not consult the government
- Refuse workers to join trade unions
- They might interfere with local politics
- They dictate terms and conditions
State corporations/parastatals
-Enterprise/companies that are partially owned and controlled by the state.
Characteristics of state enterprises
• They are created by the government in order to perform commercial activities on
the government behalf
• They are funded by the state
• The profit goes back to the government
• The aim is to provide proper services to the people
Examples of parastatals in Namibia
➢ Air Namibia
➢ Telecom
➢ Transnamib
➢ Namcol
➢ Nampower
➢ Namwater
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➢ Road authority
➢ Namcor
➢ Fishcor
➢ NBC
Challenges of parastatals
• Lack of money
• Lack of technology
• Lack of skilled workers
Privatisation/what is meant by privatisatisation
-The process of selling state owned enterprises to private companies/individuals
Advantages of privatisation
There is more capital/finance to improve/more revenue from sale
- It gives more choices to consumers/variety of products
- It responds quickly to changes in demand
- It creates jobs/reduces unemployment
- It encourages competition which keeps prices low
- It improves quality of products/services
- It leads to new innovations/ideas
Disadvantages of privatisation
-Lack of skilled workers
-lack of technology
-sometimes prices are too high
-they might privatise everything
Citizens and empowerment
Citizen is a person who (is) was born and living in a specific country or has been living
in the country for more than five years and has acquired a citizenship of that country.
-Citizens have rights to be protected by the law.
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-They have rights to vote in elections
-They also need to know about what is expected from them by the state.
Decentralisation/localisation
All decisions are made at regional or local authority levels.
Localization means authority, power and decision making is decentralised to town
councils and village councils
Advantages of localisation
• All decisions are made at town or local authority levels
• Process becomes shorter because forms and documents do not need to be sent
to the head office.
• Local people are empowered to make their own decisions
Disadvantages of localisation
• Process might not be fair to all
• Resources are not equally distributed
• All local authorities are evaluated on the same scale which makes it difficult
Technology
Machines or tools used to increase production
Three types of technology
- Simple technology
- Intermediate technology
- Complex/advanced/high technology
Definitions
Simple technology-is technology that uses simple tools in production process
Intermediate technology-is technology that is better than simple but not better
than complex.
-technology that is not too simple and not too complex.
-technology that is cheaper than complex and slightly
mechanised than simples.
Complex technology-machines used in the production processes.
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Diagrams to illustrate the types of technologies
Simple technology intermediate technology complex technology
Advantages of simple technology
• Its simple everyone can use it
• Machinery are not expensive which makes it easy affordable to everyone
Disadvantages of simple technology
• Production may take longer
• The output is low
• Work is done very slowly
• The tools are not very durable-they don’t last longer
Advantages of Intermediate technology
- More affordable/ cheaper compared to complex technology
- Easy to use and maintain/ no need to be highly skilled
- Uses little energy/ cheaper to operate
- Produces goods for the local market at reasonable prices
- Production is faster than simple technology
- The outputs will increase compared to simple technology
Disadvantages of intermediate technology
-Only small amount of goods can be produced at a time compared to complex
technology is used.
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Advantages of complex technology
-Production is very fast as most of the work is done by machines
-The outputs increases rapidly
-Labour cost is reduced as most of the work is done by machines
-Produce high quality products
-Save time
Disadvantages of complex technology
-Machines are very expensive to buy
-Highly skilled labour force needed to operate the machines
-Expensive to maintain
-Not all spare parts are available locally
-Machines can cause pollution
-Replaces human labour/less jobs available leading to unemployment
The impact of modern global technology
-Modern technology has made communication easier and more effective.
-Modern technology has enabled businesses to work faster and efficiently e.g. fax
machine, email, television
Micro-electronics
-Small electronic devices e.g. cellphones and laptops
-Micro-electronics help us to communicate with people around the world.
-They help us to increase production at higher level.
Advantages of micro-electronics
• Easy and fast to communicate with anyone around the world
• Makes work easier as most of the problems can be solved by communicating
with experts via internet.
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Disadvantages of micro-electronics
• Not everyone has access to electronics
• Very expensive to buy, run and maintain
Biotechnology
Is the technology that is derived from living things to produce goods and services.
-Using resources from nature to produce goods/products e.g. manufacturing gas from the
waste of living organisms.
-Gas is extracted or taken out of human waste e.g. faeces used as fuel or energy sources
this is called biogas/natural gas
Advantages of biotechnology
-it is natural and easy to get
-Biotechnology plays a vital role in industrial processes such as biofuel production, bio-
based materials manufacturing, and bio refining.
-Crop Improvement and Food Security
-Healthcare Innovations: Biotechnology has revolutionised the healthcare industry by
enabling the development of new drugs, vaccines,
- Improved Livestock and Animal Health: Biotechnology has led to improvements in
livestock breeding, genetics, and disease management, enhancing animal health and
welfare
Disadvantages of biotechnology
- Very expensive machinery
- Needs highly skilled people to operate
- System is very expensive to use
- Expensive to maintain
Examples of biotechnology that is used in Namibia
• Used yeast to make bread, beer, and wine
• Added bacteria to milk to make sour milk
• Used dead plant materials with fungi and bacteria to make compost to return
nutrients to the soil
• Use plants for medicines.
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Communication
Is a way of sharing information or ideas in order to give a message or to reach an
agreement/objective
Methods of communication
• Written communication-traditional way of communicating with others like to
write letters
• Electronic communication-message is sent electronically over a long distance
e.g. fax machine, telephone, e-mail
• Visual communication-visual images are used to communicate e.g. posters,
advertisements, photographs and television.
• Verbal communication and non-verbal-using words to speak to someone and
listen to others. Communication using body language e.g. nodding heads to
show agreement.
Barriers to communication
• The sender does not explain the message clearly
• The receiver may not understand the language used
• Equipment does not work or used incorrectly
• Message might be distorted or twisted
Appropriate technology
-The most suitable way of producing goods and services.
-The right technology for the job
-Technology that is most useful and efficient for people at a particular time
NB: MEDCs use complex technology to produce goods and services in large scale
while developing countries mostly use simple and intermediate technology.
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The above technology is appropriate because:
-No access to electricity
-Low income/cheaper production
-No access to modern technology/complex technology
-More useful for them
-Traditional method (they are used to it)
-Small scale production.
Economies of scale/what is meant by economies of scale?
-Is the lower cost of production on a large scale
-Increase in the level of production while lowering the cost of production.
What can lead to the economies of scale?
• Specialists services
• Skilled labour force
• Improved infrastructure
• Specialist supply of raw materials and capital goods
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Which type of technology can lead to economies of scale?
Complex technology
Methods of production
A producer can decide to use a lot of capital and less labour or use more labour and
less capital in the production process. These methods are called capital intensive and
labour intensive
Labour intensive-when a factory uses more human effort in the production process
Capital intensive-when a factory uses more machines in the production process
Describe the differences between labour intensive and capital intensive
production.
Advantages of labour intensive
• Technology is simple or intermediate
• Less capital is used to produce goods and services
• Provide jobs for the people
• Produce goods for the local market at reasonable prices
Disadvantages of labour intensive
• More time is spent on the production process/production might take longer
• High labour cost
• Work is done slowly
• Tools are not very durable
Advantages of capital intensive
• Output increases rapidly
• Labour cost is reduced as most work is done by the machines
• Production is very fast as most of the work is done by machines
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• Produce high quality products
• Save time
Disadvantages of capital intensive
• Machines are expensive to buy
• It is not affordable to most of the people
• Use a lot of energy/electricity
• Highly skilled labour force needed to operate the machines
• Expensive to maintain
• Not all spare parts are available locally
• Machines can cause pollution
• Replaces human labour/less jobs available leading to unemployment
Images illustrating labour intensive and capital intensive
Inputs and outputs in the production processes
Inputs-are the things that you need in the production processes e.g. water, electricity,
raw materials, machinery, labour.
Outputs- are the final products that are produced e.g. by products, finished products,
waste products, semi-finished products.
Production processes - activities that take place to make a finished product (goods)
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Inputs and outputs in a factory
Economic sectors
-Primary-agriculture, fishing, mining forestry
-Secondary-production of furniture, production of power from water
-Tertiary/services-transport, health, education
-Quaternary-use of technology
Economic choices
• A market economy/capitalist-produces affordable goods and services by using
cheapest and efficient method of production. Prices are controlled by market
forces supply and demand.
• Planned economy-government controls the production of goods services;
consumer goods are usually in short supply. The prices of goods are controlled
by the state/government.
• Mixed economy-has the element of market economy mixed with the element of
planned economy. Prices are controlled by both state and market
forces/supply and demand
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Check your progress
Study Fig. 1, which shows information about production.
Fig.1
(a) (i) What is meant by production? [1]
(ii) Explain why production is important. [1]
(iii) Using Fig. 2, identify three factors of production. [1]
(b) (i) Give two ways in which land is used in the production process. [2]
(ii) Describe the difference between private and communal land ownership. [2]
(c) (i) What is meant by labour? [1]
(ii) In the production process, specialisation and division of labour can be used.
Define the terms specialisation and division of labour. [2]
(iii) Describe three advantages and three disadvantages of division of labour. [6]
(d) (i) Using Fig. 2, identify two examples of capital goods. [2]
(ii) Describe the difference between capital goods and money capital. [2]
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(e) The photograph shows intermediate technology
(i) What is meant by intermediate technology? [1]
(ii) Suggest three advantages of intermediate technology. [3]
(iii) State and define two types of technology which could be used to produce
goods, other than intermediate technology. [4]
(f) (i) What is meant by economies of scale? [1]
(ii) Which type of technology can lead to economies of scale? [1]
(f) Countries organise their production in different ways.
(i) Who own the resources in a planned economy? [1]
(ii) What controls the prices of the goods and services in a market economy? [1]
(iii) Describe the characteristics of a country with a mixed economy. [3]
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