Chapter 1 - Chain of Production 

 
Production:  ​Economists  might  describe  production  as the ‘creation of utility’ making something 
useful such as clothing from something that was not so useful before such as cotton fibre.  
 
Production  is  the  provision  of  goods  and  services  to  satisfy  human  needs  and  wants  and 
production can be divided into two branches: industry and service.
 
Needs: ​the things human beings require for survival such as food, water, shelter and clothes. 
 
Wants:  ​the  things  people  would like to have that make life more pleasant such as a television or 
a  car.  These  wants  make  people  more  comfortable,  fashionable or give them a better quality of 
life but people do not need these things to sustain life. 
 
Example:  ​These may be material wants - visible item such as domestic appliances (for instance, 
washing  machine  and  microwaves).  These  wants  may  be  immaterial  wants  -  services  such  as 
transport, communication services and holidays. 
 
1.2. The branches of Production. 
 
Production may be divided into two other strands:  
 
1.  Direct  Production​:  When  a  person  tries  to  provide  all  he  needs  by  his  own  efforts  -  for 
example, an african farmer who has a small area of land and farms it to support his family. 
 
2. Indirect Production​: This covers most kind of production. It is when a person concentrates on 
one  occupation  and  produces  a  surplus  -  for  example,  a  canadian  wheat  farmer  who  trades 
wheat for goods and services produced by other people and uses money to trade. 
 
Production  may  be further broken down into several industries and activities: These are primary, 
secondary and tertiary.  
 
Primary  production:  ​Obtaining  or  extracting  natural  resources  from  the  earth.  May  be 
exhaustive  -  industries  that take resources that are not replaced, e.g. mining, or non exhaustive - 
where resources are renewed, e.g. farming.  
 
Primary production may be further divided into two kinds: 
 
1.  Exhaustive  industries:  These  are  the  industries  that  take  resources  from  nature  that  are  not 
replaced. For instance, mining (coal miner), quarrying (stone blaster), and drilling (oil driller).  
 
2.  Non-exhaustive  industries:  These  industries  take  resources  that  are  renewed  from  time  to 
time. For instance, farming (farmer), forestry (lumberjack), and fishing (fisherman). 
Secondary production:​ Changing raw materials into finished goods by manufacturing.  
 
Natural  resources  are  taken  from  a  primary  producer  and  their  form  is  changed  using  labour, 
machinery  and  technology.  Manufacturing,  construction  and  processing  are  all  forms  of 
secondary production.  
 
Manufacturing  takes  place  in  a  factory.  It may involve processes (for example, cutting stitching, 
assembling  and  welding).  Manufacturing  industries  and  occupations:  steel  making  (foundry 
worker), car (mechanic), and furniture (carpenter).  
 
Construction  involves  building  or  assembling  manufactured  parts  into  a  final  product.  Some 
construction industries and occupations: house building (bricklayer), boat builder (welder). 
 
Processing  is  where  raw  materials  are  changed  into  semi-manufactured  goods.  Processing 
industries and occupations: food (baker), oil refining (engineer).  
 
Tertiary  production:  The third stage of production involves the provision of services. These may 
be of two general kinds: commercial (indirect services) and direct services.  
 
1.  Commercial  (indirect  services):  These  services  are  concerned  with  distribution.  They  help  to 
distribute  the  raw  materials from primary production and the goods from secondary production. 
Commercial or indirect services make these products more available to those who want them. 
 
2.  Direct  services:  These  services  are  given  directly  to  the  person  receiving  them  with  no  other 
service  provider  involved.  The  services  are  given  to  people  to  make  them  healthy,  happy,  more 
secure  and  to  amuse  them.  They  often  help  people  to  work  more  productively  -  as  a  healthy 
person is likely to work harder than someone who is feeling unwell.  
 
Service  industry  and  occupation:  health  (doctor,  dentist,  nurse),  entertainment  (actress,  singer, 
writer), safety (police officer, soldier, firefighter), legal and financial (lawyer and accountant).