Production, Division of Labour and Factors of Production
Production is the creation of utility - form, place, time or possession utility - not merely the making of physical goods. The exam asks you to classify production, explain division of labour and its limits, and match each factor of production to its reward.
Types of production
- Primary - extraction from nature: farming, fishing, mining, forestry (Cameroon's cocoa, timber, crude oil).
- Secondary - manufacturing and construction: ALUCAM's aluminium smelter at Edéa, CIMENCAM cement, bread baking.
- Tertiary - services: teaching, banking, transport, hairdressing, trading. They are productive because they create utility.
Division of labour and specialisation
Division of labour splits a job into tasks, each performed by a different worker or region. Adam Smith's pin-factory illustration: ten workers each doing one operation make far more pins than ten workers each making whole pins. Advantages: speed, skill, shorter training, use of machinery, cheap mass output. Disadvantages: monotony, unemployment when one process fails, loss of craftsmanship, dependence between workers, extra transport of semi-finished goods. It is limited by the size of the market, the nature of the product (a tailored gown cannot be split), available capital and labour supply.
The four factors and their rewards
- Land - all natural resources, including soil, water and minerals; reward = rent.
- Labour - human physical and mental effort; reward = wages or salary.
- Capital - man-made goods used to produce more goods (machines, tools, buildings); reward = interest.
- Entrepreneurship - organising the other factors and bearing risk; reward = profit.
Worked example
Five workers at a fish-smoking site in Limbe each perform all five tasks and together produce 100 kg a day. After division of labour and the hiring of one extra worker, output reaches 175 kg. Output per worker before = 100 ÷ 5 = 20 kg; after = 175 ÷ 6 ≈ 29.2 kg. The gain is about 9.2 kg per worker per day. Reasoning: specialisation cut switching time, but the gain is capped by how much smoked fish the local market can absorb.
Traps
- Calling money "capital"; money becomes capital only when it buys productive assets.
- Saying tertiary activities are unproductive.
- Listing only the advantages of division of labour and ignoring the limits, especially market size.