Chapter 2: Classification of Business

Question 1

Pre-industrial

Answer 1

LDC - Least Developed Country
(A developing country, or less developed country, often has a small industrial sector and a lower standard of living compared to other countries)

Question 2

Countries in the LDC sector

Answer 2

• Afghanistan
• Angola
• Bangladesh

Question 3

Industrial

Answer 3

MIC (Middle Income Country)

Question 4

Countries in the MIC sector

Answer 4

• Brazil
• Russia
• India
• China

Question 5

Post-industrial

Answer 5

MEDC (More Economically Developed Country)

Question 6

Countries in the MEDC sector

Answer 6

• South Korea
• Japan
• United Kingdom.

Question 7

What is industrialisation?

Answer 7

The growing importance of secondary sector business activity and the reduced importance of primary sector business activity. The emerging economies of both China and India are good examples.

Question 8

What is de-industrialisation?

Answer 8

The growing importance of the tertiary sector and the reduced importance of the secondary sector. The UK and the USA are good examples of this type of economic activity.

Question 9

Notes on the primary sector

Answer 9

• Involves extracting or harvesting natural resources from the land or sea
• Includes agricultural products such as rice, fish, wood, coal and oil
• PS business activity often provides raw materials for secondary sector business activity
• However, some primary sector business activity produces final products e.g. consumers can buy raw fruit, vegetables and fish

Question 10

Examples of primary sector business activity

Answer 10

• Farming
• Fishing
• Forestry
• Mining

Question 11

Examples of secondary sector business activity

Answer 11

• Refining
• Manufacturing (food canning, car manufacturing)
• Construction (furniture making, house building)

Question 12

Examples of tertiary sector business activity

Answer 12

• Shops
• Restaurants
• Banks
• Cinemas
• Airlines

Question 13

What services does the tertiary sector produce?

Answer 13

• Retailing
• Finance
• Entertainment
• Transport

Question 14

Example of a chain of production: Oil

Answer 14

• Oil is extracted from underground, primary sector business activity
• Oil needs to be refined to produce other products such as petrol and gas, carried out by businesses in the secondary sector
• Tertiary sector activity is needed to bring the petrol to your nearest petrol or gas station, for sale to the final consumer

Question 15

Quaternary sector job examples

Answer 15

• Computing
• ICT
• Consultancy (offering advice to businesses)

Question 16

What sector does the quaternary sector match with?

Answer 16

The quaternary sector is sometimes included with the tertiary sector, as they are both service sectors.

Question 17

What business sectors make up most of the UK’s economy?

Answer 17

The tertiary and quaternary sectors make up the largest part of the UK economy, employing 76% of the workforce.

Question 18

Why do primary sector jobs decline?

Answer 18

• Jobs like farming get mechanised
• Workers prefer well paid, less ‘dirty’ tertiary jobs to primary jobs

Question 19

Why do secondary sector jobs increase?

Answer 19

• Secondary industries increase in LDCs (like Vietnam) that have cheaper labour costs so work is out-sourced
• This labour is manual so a large, cheap workforce is needed

Question 20

Why do secondary sector jobs decrease?

Answer 20

• Fewer people are needed to work in factories as robots are taking over jobs
• Increased use of machinery

Question 21

Why do tertiary sector jobs increase?

Answer 21

• People have time and money
• Greater demand for leisure services

Question 22

Organisations in the private sector

Answer 22

• Sole traders
• Partnerships
• Limited companies

Question 23

Organisations in the public sector

Answer 23

• Government departments
• Public corporations
• Nationalised industries

Question 24

Private sector (decisions about what, how and for whom to produce)

Answer 24

Decisions about:

• What to produce - Consumer choices
• How to produce - Firms want to make profit
• For whom to produce - Customers’ buying power

Question 25

Public sector (decisions about what, how and for whom to produce)

Answer 25

Decisions about:

• What to produce - The government decides
• How to produce - The government decides
• For whom to produce - The government decides

Question 26

Private sector decisions (notes)

Answer 26

• In the private sector, consumers want to buy goods and services
• Consumer choices help businesses to decide what they produce
• Businesses only produce the goods and services that consumers want if they can make a profit from doing so
• Businesses produce their products at the lowest cost(s) so they can make a profit when the products are sold
• Only consumers who have enough money will be able to pay the price charged

Question 27

Public sector decisions (notes)

Answer 27

• Produces goods and services that all people in the population need
• E.g. electricity, roads, education and health care
• Government makes decisions on how to produce these goods and services
• Decisions are based on providing good-quality services to the public, not making profit
• Some public sector goods and services are free at the point of use like primary and secondary education and hospitals
• Other goods and services are sold to consumers
• If consumers can’t afford them, the government might sell them at a lower price or provide them free of charge