Economics 2020-10-19

Section 2: Production, Economic Resources and Resource Allocation

Topic: The main sectors in an economy
The main sectors in an economy are:
● Primary
● Secondary
● Tertiary
The primary sector
Primary sector comprises of the factors of the land and the sea. Examples of industries include
agriculture and forestry; which produces things of land. Fishing; which produces things of from
the sea. Mining such as for asphalt, bauxite and petroleum etc.

The primary sector

The Secondary Sector

This sector is basically the manufacturing, it takes the raw materials from the primary sector and
converts them into finished and semi-finished products.

The secondary sector

 The Tertiary Sector
This is the service sector. Examples of firms in this sector include retail industries, hotels,
restaurants, cafes, transportation, communication, banking, insurance, medical, tourism and postal
services.

Tertiary sector

The cost of production

This is the sum of the payments of all the factors used to produce a good.
The short run and the long run
The short run
Is the time period when it is not possible to change/vary the quantities of all factors of
production(inputs) used in the production process. That is the time period in which there is at least
one fixed factor. The firm in the short run can make decisions to increase some factors of
production but not all.
The long run
Is the time period in which all factors of production (inputs) are variable. The factors of production
are variable because the firm has enough time to adjust its inputs.

Variable factor
Is one of which the amount can be change/vary in the short run. Example labour and raw materials.
Fixed Factor
Is a factor which the amount is not possible to vary/change in the short run. Example land and
capital.

Ria produces pizza from her home to sell.

In the scenario above identify from Ria’s business:
i) The four factors of production
ii) Three examples of the fixed factors
iii) Three examples of variable the factors
(10 marks);