Production

• Barter


  The direct exchange of goods or services without the use of money
• Money


  An instrument of exchange
• Instruments of exchange


  • Money
  • Other instruments of payment
• Production


  1. Using natural resources

  2. Human effort

  3. Tools

  4. Other resources to make goods and services to satisfy needs and wants
• Needs


  Goods or services that are necessary for survival
• Wants


  Goods or services that one desires but are not necessary to one's survival
• Good


  A physical product
• Service


  A product we experience
• Tangible commodity


  Can be held, seen or touched
• Intangible commodity


  Cannot be seen, held or touched, but can be experienced
• Subsistence production


  Producing all the things needed or wanted for themselves, either individually, for their own families or within their local communities
• Specialisation


  • Enabled communities to produce more than they needed themselves
  • Resulted in a surplus that could be exchanged or traded
• Specialisation increased the efficiency of production as individuals could focus their efforts on a small number of tasks and produce far more than when they tried to do everything needed for themselves
• Over time, regional specialisation increased as people became more skilled at their chosen productive activities and were able to produce more as they developed their skills and knowledge, for example as carpenters, blacksmiths and painters
• Specialisation required communities to engage in the exchange of goods and services to enjoy a wider range of products than they could produce themselves
• Instruments of Exchange


  A medium through which goods and services are exchanged
• Money


  A standardized unit of value widely accepted as a medium of exchange
• Other Instruments of Payment

  Alternative methods of transferring value or making payments, such as gift cards, credit cards, debit cards, EFT, and bartering
• Exchange


  The act of trading one thing for another (e.g., apple for orange)
• Payment


  The act of settling a debt or obligation, often by transferring value or goods
• Specialisation in production


  Individuals or whole communities focused their efforts on the production of one or a small number of different goods, allowing them to produce far more in total than they had previously when they tried to produce everything they needed for their own survival
• Specialisation in production


  • It not only required communities to exchange their different goods with each other but also encouraged trade in services
  • It allowed each community to enjoy a wider variety of goods and services than they did before specialisation
  • It led to the development of businesses
• Barter


  The earliest form of exchange, involving trading one good or service for another of equal value, without the use of money
• Money


  A medium of exchange that is generally accepted within a society, which can be any commodity that people are willing to accept in exchange for all other goods and services
• Early forms of money

  • Beads, feathers, shell, grain, small stones, gold, silver, and other precious metals
• Goldsmiths


  They had vaults in which they kept gold, silver and other precious metals, and issued paper receipts to customers who deposited their holdings, which became the earliest form of paper money
• Functions of money


  • To provide a generally acceptable medium of exchange
  • To be a unit of account
  • To be a good store of value
  • To provide a means of deferred payment
• The development of money allowed societies to move away from direct exchange (barter) towards indirect exchange using money.