THE INSTITUTE OF FINANCE MANAGEMENT

FACULTY OF BUSINESS AND ECONOMICS

5 TUMWENDEGE IMC/BAC/2416408
GILBERT SANDAGILA
 06 LOVNESS IMC/BAC/

QUESTIONS;
23. Why do people exchange goods and services
24. What is meant by land as a factor of production.
25. Define Industry and explain primary industry?
23.
Trade is the exchange of goods and services people decide to trade because they expect to benefit
from it. When one or both parties cease to reap benefits from an exchange, or when they believe
they can no longer gain from trading, exchanges stop.
Specialization and Comparative Advantage: According to the principle of comparative
advantage, individuals and nations can produce certain goods and services more efficiently than
others. By specializing in what they do best, they can produce surplus goods and then trade with
others to obtain the goods and services they need. This leads to an overall increase in the
efficiency of resource allocation and productivity.
Mutual Benefit: Exchange occurs because it creates mutual benefits for all parties involved.
When two individuals trade, it usually implies that both parties value what they receive more
than what they give up. This voluntary exchange leads to a situation where both parties are better
off than before.
Access to Variety: Trading allows individuals and businesses to access a broader variety of
goods and services than they would be able to produce on their own. This variety enhances
consumer satisfaction and can lead to improvements in quality of life.
Economic Efficiency: Markets facilitate the exchange of goods and services, enabling a more
efficient allocation of resources. When people trade, resources flow to their most valued uses,
which can result in lower production costs and prices.
Cultural Exchange: Goods and services often carry cultural significance, and exchange can be a
way of sharing and preserving cultural practices. Trading not only involves tangible items but
also the exchange of ideas, traditions, and innovations.
Building Relationships: Exchange is often a way to foster social relationships and networks
within a community. Barter and trading can strengthen bonds between individuals or groups,
which is essential in fostering trust and cooperation.
Risk Management: Exchange can help individuals and businesses mitigate risks. By trading,
parties can diversify their sources of goods and services, thus reducing their exposure to market
fluctuations or uncertainties.
 Economic Growth: On a larger scale, when people exchange goods and services, it contributes
to economic growth. Increased trade can stimulate production, create jobs, and enhance overall
economic performance.
Generally; people exchange goods and services to gain access to the benefits of specialization,
diversify options, foster relationships, and enhance overall economic efficiency. This
multifaceted process is at the core of economic interactions and is essential for individual and
societal prosperity.

Land refers to all nature resources on the earth, it is the site when production is done. Its reward
is rent whereby the resources can be renewable like forest or nonrenewable resources like gold,
oil or water says Edward Petersmarck executive director of practice development at M&O
Marketing.
Land is a factor of production because it encompasses the natural resources necessary for
producing goods and services, it is a fixed and essential input, it supports infrastructure
development, and it plays a critical role in generating income and sustaining economic activities.
Understanding land's importance in production helps in making informed decisions about
resource allocation, land use policies, and economic planning.
Land is the factor of production due to the following ;
Land it is fixed supply; Land is strictly fixed factor of production, obviously the quantity of land
in existence will always remain the same and human power can be altering that.
Land is immobile; Land is static factor one cannot shift the natural resources from their origin
place.
Land has multiple uses; We can use land in a variety of ways for various purposes, however its
suitability for all uses is definitely not the same. For instance, we can use a piece of infertile land
to set up a factory but not for cultivation agriculture.
Land is heterogeneous; There are no two types of land can be used the same, there are a plethora
of characteristics which define a type of land and two instance of land are bound to differ on at
least one of these characteristics.
Land is permanent and has indestructible powers; Most of the features related to land are out of
realms of human power, we can only degrade or upgrade the characteristics of land up to extent.
Location and Accessibility: The geographic location of land plays a critical role in production
efficiencies. Proximity to markets, access to transportation networks, and environmental factors
can significantly impact production capabilities and costs. Therefore, land is a key asset in
determining the economic viability of a production ven
Infrastructure and Development: Land provides a physical space where production activities can
occur, and it is essential for building infrastructure such as factories, farms, roads, and
warehouses. The development of land into productive sites can enhance economic activity and
productivity.
Income Generation: Land can generate income through rent, sale, and leasing for various uses,
such as agriculture, commercial real estate, and resource extraction. Property owners can derive
revenue from their land, contributing to the economy and providing a return on investment.
Environmental Considerations: Land is also integral to environmental sustainability and
ecological systems. The use of land for production must consider environmental factors,
including soil health, biodiversity, and climate conditions, which can impact long-term
productivity.
Role in Agricultural Production: Agriculture is one of the most important sectors that utilize land
as a factor of production. The quality, fertility, and management of land directly affect
agricultural outputs, making it indispensable for food production and food security.
Generally; land is a factor of production because it encompasses the natural resources necessary
for producing goods and services, it is a fixed and essential input, it supports infrastructure
development, and it plays a critical role in generating income and sustaining
economic activities. Understanding land's importance in production helps in making informed
decisions about resource allocation, land use policies, and economic planning.

Industry refer to economic activity concerned with the processing of raw materials and
manufacture of goods in factories. Also industry can be describing as a sector of the economy
that is concerned with the extraction and harvesting of natural resources. This industry forms the
backbone of economic activity since it supplies the raw materials needed for other industries.
Primary industry is the industry that extract or harvest resources directly from the earth. The
following are the examples which are;
Agriculture; Cultivation of crops and livestock farming.
Forestry; Harvesting timber and other forest products.
Fishing; Commercial fishing and aquaculture.
Mining; Extraction of minerals, metals, and fossil fuels (like coal, and other natural gas).
Quarrying; Extracting stone, sand, and gravel. The following are the characteristics of
primary industry which are as follows;
Resource-based: Primary industries focus on the use of natural resources that are largely
unprocessed.
Labor-intensive: Many primary industry activities, especially in agriculture and fishing, require
significant human labor.
Seasonal Variations: Production in primary industries is often subject to seasonal changes,
particularly in agriculture, leading to varying outputs throughout the year. Foundation for Other
Industries: Primary industries provide essential raw materials that sustain secondary
(manufacturing) and tertiary (services) industries, making them crucial to the overall economy.
Economic Development: The health of primary industries can influence a country's economic
development, particularly in developing nations that rely heavily on agricultural exports and
natural resource extraction. Not only this but also primary industries are very important in our
daily activities, the following are the importance of Primary Industry;
Economic Base: Primary industries are often the economic foundation of many countries
providing employment and income, particularly in rural areas.
Resource Supply: They supply essential materials for the manufacturing sector, influencing
production processes and market supply chains.
Export Earnings: In various economies, especially those rich in natural resources, primary
industries can significantly contribute to export earnings, helping to balance trade deficits.
Food Security: Agriculture, a major component of primary industries, is critical for ensuring
food security and supporting population health.

REFERENCE;
Almeida, A.N. & Da Silva, João Carlos & Angelo, Humberto. (2013). Importance of primary,
secondary and tertiary industries for sustainable development. 9. 146-162.
Alain Andrton (1991). Economics. (2nd Ed.).oxford :
Units(2,17,56,58,62,63,93),Page(7,96,350,361,385).
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https://www.wichita.edu https://www.toppr.com/guide/business-economics/theory-of-
production-land/ https://www.britannica.com/topic/primary-industry
https://www.economicshelp.org/concepts/primary-sector/