CH- 2: Classification of businesses

Economic Sectors:

 Primary Sector – Extracts and uses the natural resources from the earth.
e.g. Fishing, farming

 Secondary Sector – Manufacture goods using raw materials from primary

sector. e.g. Car manufacturers and other factories

 Tertiary Sector – Provides service to consumers and other sectors of the

industry e.g. Restaurants, car showroom, travel agent

Relative importance of economic sector in a country can be measured

by:

 The percentage of the total number of workers employed in each sector.

 The value of output produced in each sector and the proportion of this to
the real GDP.

Changes in sector importance

 De-industrialization – when manufacturing sector becomes less important

in a country.

Why the importance of sectors changes?

 Primary sector resources get used up e.g. overfishing, deforestation.

 Factory costs (usually wages) are too high e.g. wages in China/India are
cheaper
 People spend more on the tertiary sector as they become wealthier. e.g.
more restaurants, travel agents

Almost all the countries of the world follow mixed economy. A mixed
economy has both the private Sector and public Sector.

 Private Sector – Businesses not owned by the government but by

private individuals. Main goal of private Sector is profit making.

Advantages:
  High efficiency and lower costs
 Competition is encouraged (prices will be lower)

Disadvantages:

Social welfare is often neglected.

Workers may lose jobs to improve efficiency/cut cost (private sector business
does not care about employment rates in countries)

 Public Sector – Government/State owned businesses. (Goal = non-profit,

service for all citizens) e.g. Electricity, police, public transit

Advantages

 Business is funded by government

 Encourage more jobs

Disadvantages

 Low efficiency
 No competition between businesses