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2) Classification of business

The document outlines the three economic sectors: primary (extraction of natural resources), secondary (manufacturing), and tertiary (services), highlighting their relative importance in developing versus developed countries. It discusses the impact of de-industrialization, the characteristics of mixed economies, and the roles of public and private sectors, including recent trends like privatization. Changes in sector importance are attributed to resource depletion, competition from newly industrialized countries, and shifts in consumer spending towards services as wealth increases.

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lammarco496
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12 views2 pages

2) Classification of business

The document outlines the three economic sectors: primary (extraction of natural resources), secondary (manufacturing), and tertiary (services), highlighting their relative importance in developing versus developed countries. It discusses the impact of de-industrialization, the characteristics of mixed economies, and the roles of public and private sectors, including recent trends like privatization. Changes in sector importance are attributed to resource depletion, competition from newly industrialized countries, and shifts in consumer spending towards services as wealth increases.

Uploaded by

lammarco496
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Definitions:

Primary sector: the sector of the industry that extracts and uses the natural resources of
Earth to produce raw materials used by other businesses.
Secondary sector: the sector of the industry that manufactures goods using the raw
materials provided by the primary sector.
Tertiary sector: the sector of the industry that provides services to consumers and the other
sectors of the industry.
De-industrialisation: occurs when there is a decline in the importance of the secondary,
manufacturing sector of industry in a country.
Mixed economy: has both a private sector and a public (state) sector.
Capital: the money invested into a business by the owners.

Relative importance of economic sectors


The three sectors of the economy are compared by:
- Percentage of the country’s total number of workers employed in each sector
or
- Value of output of goods and services and the proportion this is of total national
output.

Developing countries employ more people in the primary industries, such as farming and
mining, rather than in manufacturing or service industries. This is because in these countries
the manufacturing industry has only recently been established and most people still live in
rural areas with low income so there is little demand for services.

Most developed countries started up manufacturing industries many years ago. The
secondary and tertiary sectors are likely to employ more people than the primary sector. The
level of output in the primary sector is often small compared to the other two sectors. Most of
the workers will be employed in the service sector. In economically developed countries, it is
common to find that many manufactured goods are brought in from other countries. Along
with that, the output of the tertiary sector is often higher than the other two sectors
combined.

Changes in sector importance


Reasons for changes in the relative importance if the three sectors over time:
- Sources of some primary products, such as timber, oil, and gas, become depleted.
- Most developed economies are losing competitiveness in manufacturing to newly
industrialised countries such as Brazil, India, and China.
- As a country’s total wealth increases and living standards rise, consumers tend to
spend a higher proportion of their incomes on services such as travel and restaurants
than on manufactured products from primary products.
Mixed economy
- Private sector - businesses not owned by the government. These businesses will
make their own decisions about what to produce, how it should be produced, and
what price should be charged for it. Most businesses aim to make a profit.
- Public sector - government (or state) owned and controlled businesses and
organisations. The government or other public sector authority makes decisions
about what to produce and how much to charge consumers. Some goods and
services are provided free of charge to the consumers, such as state health and
education services. The money for these comes not from the user but from the
taxpayer.

Which business activities are usually in the public sector?


- Health
- Education
- Defense
- Public transport
- Water supply
- Electricity supply

Mixed economies - recent changes


Privatisation = where the government has changed the balance between the private and the
public sector in their economies. This is done by selling some public sector businesses to
private sector businesses.

Private sectors might invest more capital into the business than the government can afford.
Competition between the private sector businesses can help to improve product quality.

However, a business in the private sector is more likely to make more workers unemployed
than a public sector business in order to cut costs. A private sector business is also less
likely to focus on social objectives.

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