2. Factors affecting production

Labour

Labour is all human activity, whether physical or intellectual, that is required to produce goods or provide services that are necessary for people and society. Despite technological advances today, economic activity cannot rely on technology alone. Human intervention is still necessary.

Capital

Capital includes all of the resources used to produce goods or services. There are two types of capital.

• Physical capital. This includes the land on which the business is built, the construction and maintenance of the premises, and the machinery and raw materials needed for the production of the goods or services. All of these require considerable economic investment.

• Financial capital. This is the money needed to begin production. This includes loans from banks or other institutions.

Technology and expertise

The production of goods and services also requires the use of technology. Technical expertise makes possible the design, construction and use of machines and devices for the production of goods and services.

We can distinguish three types of production according to the technology they use: manual production, mechanical production and high-tech production.

A modern, competitive company requires quality training programmes for their employees and also laboratories to research new technology and to create new products.

Natural resources and raw materials

Nature gives us many elements that we transform to satisfy the needs of human society. These elements, such as water in the ground and minerals, are called natural resources. Because these resources are limited and could run out soon, we need to make sure we do not overexploit them.

Labour

Labour is all human activity, whether physical or intellectual, that is required to produce goods or provide services that are necessary for people and society. Despite technological advances today, economic activity cannot rely on technology alone. Human intervention is still necessary.

Capital

Capital includes all of the resources used to produce goods or services. There are two types of capital.

• Physical capital. This includes the land on which the business is built, the construction and maintenance of the premises, and the machinery and raw materials needed for the production of the goods or services. All of these require considerable economic investment.

• Financial capital. This is the money needed to begin production. This includes loans from banks or other institutions.

Technology and expertise

The production of goods and services also requires the use of technology. Technical expertise makes possible the design, construction and use of machines and devices for the production of goods and services.

We can distinguish three types of production according to the technology they use: manual production, mechanical production and high-tech production.

A modern, competitive company requires quality training programmes for their employees and also laboratories to research new technology and to create new products.

Economic agents

Economic agents are the people, groups or institutions involved in economic activities. They produce, exchange or consume products or services. The three main economic agents are people, companies and the state.

People are the main agents of consumption because they use a large portion of their economic resources to buy goods and services to satisfy their needs and desires.

Companies are the main agents of production and distribution. By means of labour and capital, they manufacture, market and distribute goods and services.

The public sector includes all of the economic and social activities of the state. It maintains public administration, promotes economic activity, organises public services and offers social provisions. These activities are paid for with the taxes from citizens and companies.