Economics | Types/stages of production

Understanding Production: From Raw Materials to You!

Hey everyone! Ever wondered how the bubble tea you're drinking or the smartphone in your hand came to be? Everything we use goes through a journey called production. In this chapter, we're going to explore the three main stages of this journey. Understanding these stages helps us see how our economy works, where jobs come from, and why Hong Kong's economy is the way it is. Don't worry, we'll break it down with simple examples. Let's get started!

The Three Stages of Production

Think of production as a simple recipe in three steps. First, you get the raw ingredients. Second, you cook or assemble them. Third, you serve the final dish. In economics, we call these stages:

1. Primary Production (Getting the ingredients)
2. Secondary Production (Cooking/Making the product)
3. Tertiary Production (Serving the product/Providing a service)

Memory Aid: The "P-S-T" Chain

A simple way to remember the order is P-S-T:

P - Picking from the earth (Primary)
S - Shaping the materials (Secondary)
T - Taking it to people (Tertiary)

Stage 1: Primary Production

This is the very first step of the production process. Primary production involves extracting or harvesting raw materials directly from nature. It's all about taking things from the land, sea, or air.

What does it look like?

- Agriculture: A farmer in Yuen Long growing choi sum. (Getting vegetables from the land)
- Fishing: A fisherman in Aberdeen catching fish. (Getting fish from the sea)
- Mining: Getting coal or iron ore from a mine. (Getting minerals from the earth)
- Forestry: Cutting down trees to get wood. (Getting timber from the forest)

The key idea is that nothing has been manufactured yet. These are the basic building blocks for everything else!

Key Takeaway: Primary Production

Primary Production = Extracting raw materials from nature. It's the starting point of all physical goods.

Stage 2: Secondary Production

Once we have the raw materials, what's next? We need to turn them into something useful! Secondary production is the stage where raw materials are processed, manufactured, or assembled into finished or semi-finished goods. This is the "making things" stage.

What does it look like?

- Manufacturing: A factory turning plastic and metal parts into a smartphone.
- Construction: A construction company using cement, steel, and glass to build an apartment block like the ones we live in.
- Food Processing: A bakery turning flour (from wheat) into bread. (Vitasoy turning soybeans into soy milk is a great HK example!)
- Textile Production: A factory weaving cotton into the fabric for your T-shirt.

Think of this stage as the bridge between raw materials and the final products you see in shops.

Key Takeaway: Secondary Production

Secondary Production = Manufacturing and construction. It transforms raw materials into goods.

Stage 3: Tertiary Production

So we have a finished product, like a new pair of sneakers. How do you get them? That's where the third stage comes in. Tertiary production does not produce a physical good. Instead, it involves providing services to consumers or other businesses.

This is a huge and very important category!

What does it look like?

- Retail: A 7-Eleven selling you a drink, or a Fortress selling a new laptop.
- Transportation: The MTR, KMB buses, or Cathay Pacific getting you from one place to another.
- Finance & Banking: HSBC providing a loan or helping you save money.
- Tourism: A hotel providing a room for a tourist, or a travel agent planning a holiday.
- Healthcare: A doctor at a clinic diagnosing an illness.
- Education: Your school and teachers providing you with knowledge.

Watch Out! Common Mistake

A law firm provides legal advice to a construction company. Is the law firm in secondary production because it's helping a construction company?
No! The law firm is providing a legal service. It doesn't matter who the customer is. If you are providing a service, you are in the tertiary sector.

Key Takeaway: Tertiary Production

Tertiary Production = Providing services. It connects products to people and provides intangible value.

How the Stages Work Together: Inter-relationship

It's super important to remember that these three stages are not isolated. They are linked together in a production chain and depend on each other. You can't have one without the others!

Let's trace the journey of a simple wooden table:

1. Primary Stage: A forestry company cuts down trees to get wood (raw material).
Without this, the factory has nothing to work with.

2. Secondary Stage: A furniture factory takes the wood and manufactures it into a table (finished good).
Without this, the wood is just a log, not a useful product.

3. Tertiary Stage: A logistics company (like SF Express) transports the table from the factory to a retail store (like IKEA or Pricerite). The retail store then sells the table to a customer. A bank may have provided a loan to the factory to buy machinery.
Without these services, the customer would never be able to find or buy the table!

The Dependency Web

- Secondary depends on Primary for raw materials.
- Tertiary depends on Secondary for finished goods to sell, transport, and use (e.g., computers in a bank).
- Primary and Secondary depend on Tertiary for crucial services like transportation, finance, and marketing to sell their products.

Key Takeaway: Inter-relationship

The three stages are interdependent. They form a chain where each stage adds value, leading to the final good or service that satisfies our wants.

Production in the Hong Kong Economy

So, how does this apply to us in Hong Kong? The mix of these three stages tells a very important story about our economy.

Primary Production in Hong Kong

This sector is very small in Hong Kong. Why? We have limited land and natural resources. Examples include small vegetable farms in the New Territories and the local fishing industry. It contributes a tiny fraction to our economy.

Secondary Production in Hong Kong

This sector is also quite small today, though it was very important in the 1960s and 70s (think "Made in Hong Kong"!). Most manufacturing has since moved to Mainland China where land and labour are cheaper. Some industries like food and beverage production (e.g., Lee Kum Kee sauces) and printing still exist.

Tertiary Production in Hong Kong

This is the dominant sector in Hong Kong! Our economy is a service-oriented economy. The vast majority of our economic output and jobs are in the tertiary sector. This is our specialty!

Think about what Hong Kong is famous for:

- Financial Services: We are a major international financial centre (banking, insurance, stock market).
- Trading and Logistics: Our port and airport are among the busiest in the world.
- Tourism: We attract millions of visitors for shopping, food, and attractions.
- Professional Services: World-class lawyers, accountants, and doctors work here.

Did You Know?

The tertiary sector contributes to over 90% of Hong Kong's Gross Domestic Product (GDP). This shows just how important services are to our city's prosperity!

Key Takeaway: Hong Kong's Economy

Hong Kong's economy is heavily dominated by the tertiary (service) sector. The primary and secondary sectors play a much smaller role in our modern economy.

Chapter Summary

Great job! We've covered the three types of production. Let's do a quick recap:

- Primary Production: Getting raw materials from nature. (Farming, fishing)
- Secondary Production: Making things from those materials. (Manufacturing, construction)
- Tertiary Production: Providing services. (Banking, retail, transport)

These stages are all inter-related and depend on each other. In Hong Kong, our economy is overwhelmingly focused on the tertiary sector. Keep these concepts in mind, and you'll have a solid foundation for understanding how industries and economies work!