Overview
This lecture explains how businesses are classified into three sectors—primary, secondary, and tertiary—examines their changing roles in different economies, and introduces mixed economies, privatization, and their impacts.
Classification of Businesses
- Businesses divide into three sectors: primary, secondary, and tertiary.
- The primary sector uses natural resources to produce raw materials (e.g. farming, fishing, forestry, mining).
- The secondary sector transforms raw materials into manufactured goods (e.g. car manufacturing, construction, bread baking).
- The tertiary sector provides services to consumers and businesses (e.g. transport, banking, retail, insurance, hairdressing).
Measuring Sector Importance
- The importance of a sector is measured by its share of total employment and value of output in the economy.
- Developing countries: primary sector dominates due to rural economies and low demand for services.
- Industrializing nations: secondary sector grows as manufacturing expands.
- Developed countries: tertiary sector dominates as service industries become more important.
Changes in Sector Importance
- Depletion of natural resources reduces reliance on the primary sector.
- Developed nations lose manufacturing competitiveness to newly industrialized countries.
- De-industrialization occurs as economies shift from manufacturing to services.
- Increased wealth leads to higher demand for services over goods.
Mixed Economies and Sectors
- Mixed economies have both private and public sectors.
- The private sector consists of profit-driven businesses owned by individuals or groups.
- The public sector includes government-owned organizations providing essential services (health care, education, transport, utilities).
Privatization
- Privatization is when government-owned businesses are sold to private owners.
- Benefits of privatization include increased efficiency, better cost control, more investment, and greater competition.
- Drawbacks include potential unemployment and reduced focus on social objectives.
Key Terms & Definitions
- Primary Sector — Uses natural resources to extract raw materials.
- Secondary Sector — Processes raw materials into manufactured goods.
- Tertiary Sector — Provides services to consumers and businesses.
- Mixed Economy — An economy with both private and public sectors.
- Privatization — Transfer of public sector businesses to private ownership.
- De-industrialization — Decline of manufacturing in an economy.
Action Items / Next Steps
- Review examples of businesses in each sector.
- Prepare definitions and examples for a quiz on business classification.
- Read about current examples of privatization in your country.