1.2.1 Primary, Secondary and Tertiary Sectors
| In this lesson you will learn: |
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✅ Basis of business classification, using examples to illustrate the classification ✅ Reasons for the changing importance of business classification, e.g. in developed and developing economies |
Classification of business is more likely to appear as a short answer questions on Paper 1 like this example:
| Past Paper Question Example Paper 1 (a) Define private sector ……………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………[2] |
1.2.1 Primary, Secondary and Tertiary Sectors
Basis of business classification
The primary sector is extracting or growing natural resources to supply raw materials for business. Mining, farming and forestry are all examples.
The secondary sector is manufacturing goods from raw materials. For example, a factory producing furniture. The secondary sector is also known as the manufacturing sector.
The tertiary sector involves businesses providing services to consumers or other businesses. This could be a barber cutting hair, a shop selling clothes or a bank providing loans to small businesses.
Reasons for the changing importance of business classification
As countries’ economies grow, the primary sector gets smaller and the secondary and tertiary sectors grow.
Between 1978 and 2017 China’s tertiary sector doubled as a percentage of Gross Domestic Product (GDP) from 25% to 50%.
The exceptions to this general rule are countries with large reserves of natural resources. Countries in the Middle East continue to have a high proportion of their GDP from the primary sector as oil and gas generates large revenues for their economies.
