Firms and Production
Understanding Firms
1. What is a Firm?
A firm is an organisation that uses resources (land, labor, capital, and enterprise) to produce goods and services for consumers.
Its main goal is usually to make a profit.
Examples: Apple (electronics), Tata (cars), and local shops.
2. Why Firms Exist
To produce goods and services.
To create employment for people.
To earn profits and grow.
To satisfy consumer wants.
3. The Role of Firms in the Economy
Firms are a key part of the production process in every economy.
They connect producers and consumers.
They decide what to produce, how to produce, and for whom to produce.
They contribute to economic growth through investment, job creation, and innovation.
Production
1. What is Production?
Production means making goods or providing services that satisfy human needs and wants.
It includes all activities that add value to a product — from collecting raw materials to delivering the final product.
2. Types of Production
Primary Production:
Using natural resources directly from nature.
Examples: Farming, mining, fishing, forestry.
These are raw materials for other industries.
Secondary Production:
Turning raw materials into finished goods.
Examples: Making cars, furniture, clothes, or houses.
Also called the manufacturing sector.
Tertiary Production:
Providing services to help people and businesses.
Examples: Banking, transport, teaching, healthcare.
This is called the service sector.
Labour-Intensive Production
Uses more workers than machines.
Example: Farming, tailoring.
Good: Creates jobs, low cost.
Bad: Slow, less efficient.
Capital-Intensive Production
Uses more machines than workers.
Example: Car factory, oil plant.
Good: Fast, high quality.
Bad: Expensive, fewer jobs.
Demand for Factors of Production
It means how much land, labour, capital, and enterprise firms need.
It is derived demand — depends on the demand for goods.
Example: More demand for bread → more bakers and machines needed.