Production

Production within an economy can be divided into three main stages: primary, secondary and tertiary.

Primary production

Primary production involves the extraction of raw materials (e.g. coal, iron, agricultural commodities). Raw materials can be:

Extracted – e.g. coal, iron ore, oil, gas and stone

Harvested / collected – e.g. fish

Grown – e.g. timber, cereal crops

There is little value added in primary production. The aim is usually to produce the highest quantity at lowest cost to a satisfactory standard.

Secondary production

Secondary production involves transforming raw materials into goods. There are two main kinds of goods:

Consumer goods – e.g. washing machines, DVD players. As the name implies, these are used by consumers

Industrial / capital goods – e.g. plant and machinery, complex information systems. Industrial and capital goods are used by businesses themselves during the production process.

In the secondary production sector, value is “added” to the raw material inputs. For example, foodstuffs are transformed into ready meals for sale in supermarkets; metals, fabrics, and plastics are transformed into motor vehicles.

There are many different industry sectors in secondary production. For example:

• Construction
• Electronic instruments
• Pharmaceuticals (drugs)
• House-building

Tertiary production

Tertiary production is associated with the provision of services (an intangible product). As with the secondary sector, there are many tertiary production markets. Good examples include:

• Hotels
• Private healthcare and education
• Accountants
• Tourism