Inputs definition: The elements that go into producing goods & services (Resources)
The Factors of production:
- Land; All natutral resources that can be used for production e.g. natural & mineral resources such as coal, oil, gravel & livestock such as sheep, pigs & cows, also things from the sea like fish
- Labour; Both physical & mental effort involved in production
- Capital; Goods that are made in order to produce other goods such as machinery & computers
- Enterprise; Bringing the other factors of production together in order to create goods & services. The entrepreneur carries out enterprise so by taking the financial risk he earns the profit that can be made by converting inputs into outputs
Improving efficency of the factors of production:
- Increasing the level of investment in capital equipment; High capital goods such as modern macinery, can greatly enhance efficiency
- Greater training of the workforce; Skills of the labour force are an essential element in allowing UK Businesses compete with countries that have lower wage levels.
- Using renewable or recyclable resources; Factories designed to minimise waste & improve energy efficiency so that resources are used more effectively
- Improvements in entrepreneurial skills & a willingness to take risks by entrepreneurs; Factors of production will be converted into goods & services that meet the customers needs.
Output definition: The finished products resulting from the transformation process.
Primary sector definition: organisations involved in extracting raw materials e.g. farming & oil exploration
Secondary sector definition: organisations involved in processing or refining raw materials from the primary sector into finished or semi-finished products e.g. food processors & oill refineries
Tertiary sector definition: organisations who provide services to the customer, in either the public or private sector e.g. education & resturants. Production in this sector can be commercial (where the service is for another business e.g. advertising agencies) or personal (where the service is provided directly to the individual such as plumbing), it is possibe for a service to be both such as banks.
Adding value definition: the process of increasing the worth of resources by modifying them.
Value added: sales revenue - cost of bought-in materials, components & services
Ways of adding value:
- Distribution & retailers add value by bringing the product within easier reach of the customer.
- USP; Where you may create a different design or components or image & branding
- Indentifying an attractive mix of design, function, image & service
In order for a business to make profit they must add value to the resources that they possess.