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CH 1] Business 101 1-7

Figure 1.4 The Levels of Productivity

Kroger, Hi-Vee 1
Retail Sales: Restaurants, Grocery Stores, Equipment
Tertiary Amazon, Farmers Coop,
Dealerships, Retail Stores
Burger King, Wal-Mart

Secondary Food Processing, Equipment Manufacturing, Tyson Foods, General Mills,
Product Production Ford Motor Co.

King Ranch, Georgia Pacific,
Primary Farming, Forestry, Fisheries, and Mining
Star Kist, 3M

All four factors of production generate a financial return in the form of Factor
Payments within the private enterprise system. As Figure 1.3 illustrates, these
payments are in the form of rent, wages, interest and profit. The specific payment
received varies among industries, but all factors of production are required in some
degree for all businesses and are in all three levels of productivity.

Levels of Productivity
Just as there are factors of production, there are three levels of productivity. Each primary production. First,
level identifies the production activity that takes place in an economy as it utilizes the Provides the basic raw
resources available to that economy. Each level produces inputs for the next level of elements from natural
production. The levels of production are primary, secondary and tertiary. resources.
Primary production includes those activities engaged in farming, fisheries, secondary production.
forestry and mining. This is the basic production of primary goods from our natural Second, Changes the raw
resources. materials into products that
Secondary production takes the goods of primary production and changes their will be used by the ultimate
form to meet consumer demand and adds value to the product. Secondary production consumer.
is either processing or manufacturing. Foodstuffs are processed whereas tractors and
equipment are manufactured. From farms, livestock are raised, and sent to abattoirs
for processing into steaks and hamburgers, grains grown on the land are milled for
flour and bread. Steel is produced from mined iron ore, trees are harvested to build tertiary production
houses and furniture. Aluminum ingots are stamped into refrigerators and automobile Third, Delivers the products
engines. in a usable form to the
Tertiary production concerns itself with the retail aspects of an economy. ultimate consumer.

Canned, packaged and boxed food is delivered to your local grocery store to be
purchased and used by the ultimate consumer. When you have that “Mac Attack” and
head for the “golden arches” to get a hamburger so your hunger is dissipated, you
seek out a tertiary producer. Tertiary production sells to the ultimate consumer,
someone who buys the product and uses it as a part of their own inventory and not for
re-sale. Equipment dealerships selling to the public, insurance agents, barbers, general
merchandise retailers are all engaged in tertiary levels of production.
gross domestic product
Measuring Productivity in the U.S. Economic System (GDP) The sum of all goods
and services produced in
Output in the U.S. economic system is crucial to the American standard of living. an economy during a year.
It is the output that determines the economic well-being of the nation. The overall
measure of national output is called the gross domestic product (GDP). GDP is the
sum value of all goods and services produced in the economy during a year. In a
recent year the gross domestic product was $21.4 trillion. The GDP is tracked by the
Treasury Department to estimate the tax revenue Congress can budget federal
spending on, though it continually exceeds its revenue resources and balances its
budget through deficit borrowing against future years anticipated tax revenues.

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