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Chapter-2, Classification of Business

The document discusses the three stages of economic activity: primary, secondary, and tertiary sectors. The primary sector extracts natural resources, the secondary sector manufactures goods, and the tertiary sector provides services. The importance of each sector is measured by employment levels and output value. Over time, the relative importance of sectors may change due to resource depletion, industrialization, new resource discovery, or increased demand for services. Key terms are also defined, such as deindustrialization, industrialization, public/private sectors, and privatization.

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65 views

Chapter-2, Classification of Business

The document discusses the three stages of economic activity: primary, secondary, and tertiary sectors. The primary sector extracts natural resources, the secondary sector manufactures goods, and the tertiary sector provides services. The importance of each sector is measured by employment levels and output value. Over time, the relative importance of sectors may change due to resource depletion, industrialization, new resource discovery, or increased demand for services. Key terms are also defined, such as deindustrialization, industrialization, public/private sectors, and privatization.

Uploaded by

agyte
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter – 2

Classification of Business

What are the different stages of economic activity?


There are 3 stages of economic activity. They are:
1. Stage 1: This is also called as primary sector. The primary sector of industry
extracts and uses the natural resources of the earth to produce raw materials
used by other businesses. Eg: mining, fishing, forestry etc.
2. Stage 2: It is also called as the secondary sector. The secondary sector of
industry manufactures goods using the raw materials provided by the primary
sector. Eg: building and construction, aircraft manufacturing, baking etc.
3. Stage 3: It is called as the tertiary sector. The tertiary sector of industry
provides services to customers and other sectors of industry. Eg: banking,
insurance, retail shops etc.
How is the importance of economic sectors measured?
The importance of the 3 sectors of economy is measured or compared by:
 Percentage of the country’s total number of workers employed in each sector.
 Value of output of goods and services and the proportion of this to the output
of the economy.
What could be the possible reasons for a change in the relative importance of
the three sectors over time?
The relative importance of the 3 sectors changes over time. It can be because of a
number of reasons.
 Sources of primary products such as oil, gas, timber, minerals etc. may get
depleted over time and cannot be renewed.
 The importance given to the secondary sector may increase due to large
investments made in the manufacturing sector (industrialization).
 A new source of primary product or natural resource has been discovered in
the economy.
 There might be an increase in the demand for services because of the increase
in standard of living of the people.
 The developed nations are losing their competitiveness in the manufacturing
business to the newly industrialised countries such as India, China etc. (de-
industrialisation)
Define the following terms:
1. De-industrialisation: It occurs when there is a decline in the importance of
the secondary or manufacturing sector of industry in a country.
2. Industrialisation: It occurs when more importance is given to the secondary
or manufacturing sector of industry in a country.
3. Private sector: The businesses are not owned by government. They are
owned by individuals or group of individuals. The capital is invested by these
individuals (owners) and all the decisions related to the business are taken by
them. The main aim of private sector business is to make profit.
4. Public sector: The businesses are owned and controlled by the government.
All decisions related to the business are taken by the government. The main
motive of public sector business is to provide quality goods and services to the
people of the country. The tax revenue earned by the government is invested
by them in the public sector businesses. Eg: health, defence, education, public
transport etc.
5. Mixed economy: An economy that has both public sector and private sector
businesses.
6. Capital: It is the amount of money invested by the owners into the business.
7. Privatisation: Public sector businesses are sometimes sold by the government
to the private sector businesses. Ownership of business is transferred from
government to the private individuals. This is called as privatization. The
government privatise the public sector business to:
 Increase their efficiency.
 To improve the quality of the product or services rendered.

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