CHAPTER 8 NOTES

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Production is the process of creating goods and services. It is the transformation of inputs into outputs

Chain of production: shows the various production stages through which a good or service passes before reaching the consumer

Primary: extract raw materials from earth and sea (3rd world countries)

Secondary: industries that process primary products into manufactored goods (developing countries)

Tertiary:industries that provide a service (rich countries)

Consumer sovereignty is the process by which consumers tell producers, with their act of buying, what to produce rather than producers dictating to consumers what they can and cannot buy

Productivity is the measure of the efficiency with which production is carried out. Productivity is the relationship between output of goods and services and inputs of resources

Factor productivity: Total productivity/Quantity of factor of production used.

When productivity increases a country will be able to supply more capital and consumer goods, leading to an outwards shift in the production possibility curve. this shift in the ppc means that a country is making better use of its resources and thus is facing greater wealth creation. Productivity has been improving mainly with regards to land labour and capital used.

PRODUCTION vs PRODUCTIVITY