Chapter 2
Classification of
businesses
Sectors of industry
secondary
primary by activity tertiary
by ownership
private sector public sector
STAGES OF ECONOMIC ACTIVITY
The stages involved in making and selling a wooden desk
primary Secondary Tertiary
Stage 1: primary sector
The primary sector of industry extracts and uses the natural resources of the earth to produce raw
materials used by other businesses.
For example: farming, fishing, forestry and the extraction of natural materials, such as oil and copper ore.
Stage 2: secondary sector of industry
manufactures goods using the raw materials provided by the primary sector
For example: building and construction, aircraft and car manufacturing, computer assembly, bread baking.
Stage 3: tertiary sector of industry
provides services to consumers and the other sectors of industry.
For example: transport, banking, retail, insurance, hotels and hairdressing.
ACTIVITY
Indicate which sector of industry each business is in.
1. Insurance
2. Forestry Primary
3. IT services
4. Travel agent
5. Retail business
6. Bank BB Secondary
7. rice farming
8. Travel/tourism
9. Clothes production
10. Electrical industry
11. Bus operator Tertiary
12. Bus manufacturer
Which sector of industry is most important in
Argentina?
Relative importance of economic sectors
Usually the three sectors of the economy are 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 this is of total national output
Developing countries: primary industries employ more people than manufacturing or service industries
Developed countries:in countries that started manufacturing industries many years ago, the secondary and tertiary sectors
are likely to employ more workers than the primary sector.
The most developed countries: the output of the tertiary sector is often higher than the other two sectors combined.
DO YOU THINK SECTORS VARY IN IMPORTANCE BETWEEN COUNTRIES AND OVER TIME?
Change in sector importance
There are several reasons for changes in the relative importance of 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 the newly industrialised
countries
● As a country's total wealth increases and living standards rise, consumers tend to spend a higher
proportion of their incomes on services than on manufactured products produced from primary
products.
De- industrialisation occurs
when there is a decline in the
importance of the secondary,
manufacturing sector of
industry
Examiner Tip
As economies develop, we see a movement away from the primary sector towards the secondary sector.
Post-industrial economies are focused on the tertiary and quaternary sectors.
It's easy to assume that tertiary sector employment is higher-paid than jobs in the secondary sector. This
is not necessarily the case. Value-added is certainly higher in most tertiary industries than in secondary
sector industries but in many tertiary sectors (such as hospitality and healthcare) pay is very low and a
cause for concern. Portugal and Greece, whose economies depend upon tourism, as well as the UK suffer
from low pay in the tertiary sector with many workers relying on government support to cover basic living
costs. In contrast, high-paid secondary sector engineering and construction sectors in economies such as
Germany and Norway make employees in these economies some of the highest-paid in the world.
Mixed economy
A mixed economy has both a private sector and a public (state) sector.
Private sector Public sector
businesses NOT owned
government (or state) owned
by the government.
and controlled businesses and
organisations.
Oral Activity:
1. Which business activities are usually in the public sector?
2. Suggest three possible reasons why the government of a country might
decide to own and control that industry or service.
3. What's privatisation?
PRIVATE SECTOR PUBLIC SECTOR
OWNERS
DECISIONS
OBJECTIVES
EFFICIENCY
Where does the money come
from?
BENEFITS
DISADVANTAGES