This Functional menu includes the Mill, Quarry, Mine, Barracks, Academy, Market and many kinds of Housing to increase Capacity to 1,000 or more. The Rare Goods Pit is also a Functional building. Functional items do not boost Happiness.
Housing increases Capacity. There are 5 types of Housing: Hut, Lodge, House, Mansion and Noble (Noble Hut, Noble Lodge, etc.). Houses all have a 4 by 4 footprint. Capacity needs to be balanced with Happiness, so it is important to buy Happiness items as well as Housing.
See main article Academy
You are currently only allowed to build one of the Mill, Quarry and Mine. These are all Resource producers, and will be built as part of completing the opening tutorial. It makes sense to Research upgrading them.