Classification of business

Question 1

Levels of economic activity

Answer 1

1. Primary sector
2. Secondary sector
3. Tertiary sector

Question 2

Primary Sector

Answer 2

The primary sector of industry extracts and uses natural resources of Earth to produce raw materials.

Countries that have more primary sectors are developing countries. People have low incomes so there is less demands on services.
Examples: Fishing, farming, mining.

Question 3

Secondary Sector

Answer 3

The secondary sector of industry manufactures goods using raw materials provided by primary sector.

Examples: Construction, car manufacturing, computer assembly.

Question 4

Tertiary Sector

Answer 4

The tertiary sector of industry provides services to consumers and other sectors of industry.

Examples: Banking, retail, hotels.

Question 5

De-industrialisation

Answer 5

De-industrialisation occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country.

Question 6

Changes in the relative importance of the three sectors. (3)

Answer 6

1. Sources of primary products have become depleted.
2. Most developed economies are losing competitiveness in marketing to newly industrialised countries.
3. A country’s total wealth increases and living standards rise. Consumers tend to spend a higher proportion of their income on services.

Question 7

Mixed economy

Answer 7

Mixed economy has both a private sector and a public (state) sector.

Question 8

Private sector

Answer 8

Business 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.
These business aims to make profits.
Private sector business are more efficient.
Private sector business can invest more money than the government.

Question 9

Public sector

Answer 9

Government or state owned and controlled business. The government or other public sector authority makes decisions about what to produce and how much to charge to the consumers. Some goods and services are provided free to consumers - money comes from tax payers.

Question 10

Capital

Answer 10

Money invested into the business by the owners.