“Production and Economy Sectors”

 > Explanatory Article by Marios Kyriakou, MSc Economics

About the author: Marios Kyriakou has a bachelor’s degree in Economics from the University of Cyprus and a master’s degree in Economics from the University of Warwick. He is also a holder of CySEC’s Advanced Certificate in Financial Services Legal Framework and a professional in Online Trading, Forex and CFDs with more than 7 years of experience.

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<Last updated 13.04.2020>

Dear reader,

Hi! If you are interested in Economics, I’ve prepared the below to help your understanding about industry sectors. You should take a look at this short article in which I explain what we mean by “Production” and discuss the types of Production Sectors that exist in the economy.

Production is the process in which producers/businesses use the factors of production (i.e. land, buildings, machinery, workers etc.) in order to produce goods and services. We have already mentioned that businesses use resources provided by nature or use nature as means of producing materials to be used as factors of production. For example, a car is produced with the use of metal, a material extracted from the earth/nature as raw material and later used in the production process.

> Factors of Production are basically resources that are combined in production. Combining land, buildings, machinery, computers and workers (human capital). What kind of economic activity takes place from the producer’s side? Lets see now a breakdown of the production sectors that exist in the economy.

> The Primary sector: In this sector, the extraction of raw materials takes place. This means that there are people, and businesses, who take part in the process of acquiring raw materials (resources) provided by Nature. Metals and coal have to be mined, oil must be drilled from the ground. This is known as extractive production. Collecting resources produced by nature without human intervention. Agriculture, farmed fish, vegetable and animal production. This is known as agriculture production. Collecting resources produced by nature with human intervention.

> The Secondary, or Primary, sector: in this sector humans use the raw materials taken from the primary sector, process them and transform them into products, or goods. The businesses who function in this sector are for example in the manufacturing, construction and energy production industries. In example, oil is drilled from the ground, this crude oil is produced from fossil fuel and is refined into petroleum products that people use for many different purposes such as transportation fuels, fuel oils for heating and electricity generation.

> The Services, or Tertiary, sector: It consists of the businesses, or industries where production of services takes place instead of end products. Services such as, transportation like taxis, healthcare services, haircut services etc.

Important to note that this sector consists of economic activities from people who specialize in collecting and processing information/data and researching businesses. Examples: Higher Education, Science Research, Communication, Media, Software development Auditing etc

A measure of production in an economy, or business,  is an economic indicator. For example a business measures production by counting the number of products produced, the real economic output. To measure productivity of workers it uses Labor Productivity, defined as real economic output per labor hour.

There are 2 measures of productivity:

a) Labor Productivity: Quantity Produced / Number of Workers

b) Labor Productivity: Quantity Produced / (Number of Workers x Number of Hours)

We observe an increase in productivity when the quantity produced is higher with the same number of workers, or the same number of labor hours. An increase in productivity lowers the cost of production. This is because the business is producing more goods and services with the same quantity of factors of production.

How can you increase worker’s productivity? Better organization and effective combination of factors of production , use modern technology, education and training, provide motives by giving commissions and bonuses, enjoyable working conditions.


“I hope I am clear on this one. If not, contact us on social media and we will do our best to help you.

Thank you for reading my articles and watching my videos.”

Marios Kyriakou

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