Activity in our Economy

The Nature and Purpose of Economic Activity

The central purpose of economic activity is the production of goods and services to satisfy needs and wants

• Goods are tangible products e.g. a car, a loaf of bread
• Services are intangible e.g. a haircut, an aeroplane flight
• Needs are basic requirements people need to survive e.g. food, shelter Wants are things that people desire e.g. a sports car

Production

Production is the process of creating, growing, manufacturing, or improving goods and services.

The four factors of productiuon are

• Capital
• Enterprise
• Land
• Labour

Productivity measures the efficiency or rate of production. It is the amount of output (e.g. number of goods produced) per unit of input (e.g. labor, equipment, and capital).

Labour productivity measures the amount of output per worker

Factors influencing Productivity

• Technology
• Skills and experience of the labour force
• Motivation
• Quality of factors of production
• Division of labour
• Investment

Specialisation

Specialisation occurs when a business focuses on producing a limited number of goods and leaves the production of other goods to other businesses.

Specialisation can also occur by: Region

e.g. Sheffield and Steel International

e.g. Coffee and Brazil