Production:

Is the creation of goods or services by using inputs like raw materials, labour and equipment
and to transform it into finished/ final product to satisfy human needs and wants.

Four factors of production:

Capital: Money used to buy equipment for production process, to pay for labour. Owners of
capital receive interest as a reward.
Natural Resources: All the things/ gifts from nature used to produce a product. Owners of
natural resources receive rent as reward.
Labour: The mental and physical effort used to produce a product. Workers receive salaries or
wages as a reward.
Entrepreneurship: The person who puts everything together. The owner’s of businesses. They
receive profits as a reward for their efforts.

Economic growth:
Is an increase in the number of goods and services produced in a specific year, compared to
the production of the previous year.

Productivity:
Is a measurement of the output which labour produces. People are productive when they
quickly and effectively turn inputs into outputs. It measures the time it takes workers to produce
a good or service. It also describes how quickly inputs can be turned into finished goods or
outputs for sale. In other words it is about speed. A worker who produces three chairs in an hour
is more productive than a worker who produces only one chair in an hour. It is also about how
well resources and time is being used. This is called efficiency. Example: A factory producing
100 chairs from 2 tons of material is more productive than a factory that produces only 75 chairs
from 2 tons of material.

Inputs: Outputs:
Things that are used to make a
product Product that is produced by using
Example: labour, wood, nails,
inputs
varnish or polish & material
Example: Quality completed chair

Productivity makes the economy grow i.e. the more productive people are, the more money the
country has as a whole. (More money in circulation will lead to economic growth)

Productivity can be described as the amount of goods and services produced per worker per
hour. This refers to the ratio between real production and the number of inputs that are needed
to manufacture it; the productivity of labour increases, for example, if the output (the number of
units that are produced) increases by 10% while the input (number of working hours) remains
the same.
There is an important relationship between productivity and economic growth in the sense that
improved productivity always is a prerequisite for economic growth.
For the effect of productivity on economic growth to be understood, it is necessary to distinguish
between the following concepts:
1. EXTENSIVE ECONOMIC GROWTH refers to the extension of total production of goods
and services irrespective of whether there is increased productivity per person. According to
this, extensive economic growth is possible even though there may be no increase in production
per person
2. INTENSIVE ECONOMIC GROWTH refers to the increase in production per person (or
per capita). When intensive economic growth occurs, total production increases more rapidly
than the population. Per capita growth (or income) therefore is an indicator of economic growth.

When a community’s production of goods and services expands more rapidly than the
population increases, real per capita income rises. This generally means that the economic
prosperity of the population will increase, which reflects economic growth.
Therefore: growth in production that is larger than growth in population leads to:
rise in real per capita income, which leads to increased economic growth and economic
prosperity

Inversely, a decrease in real per capita income will occur if the population increase is greater
than the increase in production. Economic decline, the opposite of intensive growth, will
therefore occur.
Therefore: growth in production that is smaller than growth in population leads to decline in real
per capita income, which leads to economic decline and decline in economic prosperity (rising
poverty)

With increased productivity, the products of a country become more competitive on international
markets and this can lead to increased exports. The reason for this is that increased productivity
can absorb wage increases, which makes it possible for business enterprises to keep the prices
of their products stable.

Activity 1:
Make a list of all the raw material and equipment (inputs) to produce the following products:
a) A shirt
b) A chair
c) A computer

Sustainable use of resources:

Our resources are scarce and therefore we have to use it in a responsible way. Resources used
to produce a product can be classified into two categories namely:
1. Renewable resources: can be grown or reproduced example a tree can be cut down and
a new one can be planted in its place.
2. Non-renewable resources: These resources cannot be replaced once they have been
used. Available quantities decrease every year. Minerals taken out of the earth by mining
companies cannot be replaced. Example coal used in power stations is slowly
diminishing unless we use renewable energy. (Wind or solar energy)

Activity 2:
Study the following table and indicate whether the examples given are renewable or non-
renewable resources:
Resources Renewable or Non-renewable resource

Trees

Water

Coal

Gold

Paper

Diamonds
 Oil

Activity 3:
Mention three negative results economic activities have had on the environment.
b) What is NEMA?
c) What is the purpose of environmental responsibility?
d) Explain how companies have to comply with NEMA regarding stakeholder action when new
projects are undertaken.
d) In January 2007, the National Environmental Management Waste Management Bill was
introduced to Parliament. Find out what strategy this Bill seeks to introduce and explain
what it stands for.

Technological advancement or development, which comprises the use of improved

techniques or methods of production, enable workers to deliver additional outputs or improve
production using the same resources. Such improvement reduces the cost of producing goods
and services. This means that a smaller input per unit is required in terms of human and
physical capital.
Technological development is achieved by means of investment in capital equipment and
research projects. For this reason, development in the field of technology (and science) will
require bigger investments and sacrifices in terms of (reduced) consumption

Technological improvements can take two forms:

1. INVENTION, which involves the discovery of new products or new processes; and
2. INNOVATION, which involves practical conversion to new techniques. This can also be
seen as the economic application of an INVENTION

Although technological developments have played an important role in promoting material

prosperity and improving the standard of living, we have to realise that such development in
itself is not adequate for sustainable economic growth. Before modern technology can ensure
economic growth, the labour force has to develop appropriate skills to be able to operate and
maintain the complicated machines that are developed. Training and the acquisition of basic
skills therefore form an important part of the successful implementation of technology. To
facilitate this, it is imperative that greater investment in formal and informal training should be
realised.
SAVING is the postponement of satisfying personal needs.
INVESTMENT is capital that is invested to make production possible.
ECONOMIC GROWTH is achieved when the increase in the production of a country is larger
than the increase in population, which means that the increase in the amount of available goods
has created wealth.
ECONOMIC DEVELOPMENT therefore has to do with the fact that the greater prosperity made
possible by economic growth has also improved the general quality of the lives of the
population, which involves improved access to education, water, housing, etc.

Factors that could lead to improvement in labour productivity (the concepts should be defined
clearly and explained adequately).
1. Climate
2. Own culture
3. Remuneration or wages
4. Working hours
5. Working conditions
6. Health and strength
7. Intelligence
8. Training and education
9. Social attitude
 10. Organisation of labour

Activity 14: (activity 4)

Technological Developments
Create a poster showing the following technological improvements:
The replacement of people with machines;
The course of development from the steam engine to the internal combustion engine to
hydroelectric power to atomic power;
Developments in the field of telecommunication;
Developments in the field of transport.

(Select any of the above.)

These technological developments have resulted in significant changes in the way of life of all
people over the past 250 years and have led to an improvement in living standards.

Activity 5
Measuring productivity
Read the case study below and answer the questions that follow.

Thembi’s mom cannot afford to give her any pocket money. Thembi told her mom not to worry
for she’s got a good business idea that will earn her some pocket money. Thembi’s idea is to
use discarded greeting cards, felt, glitter and other decorations to decorate notebook covers.
She gets down to work and sells her decorated notebooks at the local flea market. It takes her
half an hour to make a notebook cover and it costs her R10 for the notebook and decorations.
She sells the notebooks for R20 at the flea market.

a) Mr Jackson wants to buy 20 decorated notebooks from Thembi to give as gifts to his
learners. How long will it take Thembi to produce 20 decorated notebooks?
b) How much will it cost her to produce the 10 decorated notebooks?
c) Productivity refers to the relationship between the inputs in the production process and the
number of outputs that are produced. This can be measured by the formula:

Quantity of outputs
Productivity = Quantity of inputs
How can the number of outputs in a production process be increased when the inputs remain
the same?
d) Another way of increasing output is by increasing input. How can Thembi increase her input?
e) When you are able to produce more units by working faster, it decreases the cost of a single
unit. If Thembi employs her brother Tshepo to help her cut designs from old greeting cards,
Thembi will have more time to decorate the notebook covers. She pays Tshepo R1 per
design that he cuts out and she pastes one on each notebook. This increases her input costs
on the covers to R11 each. However, she now finds that it takes her only 15 minutes to
decorate a book cover. How many covers can she decorate in an hour?
f) How long will it take her to complete Mr Jackson’s order?
g) Why can we say that Thembi decreases her inputs when it costs her R1 more to produce the
units?