Chapter 2 - Classification of Businesses
Sectors of Business Activity
Primary = developing countries (low income - little demand for services)
people who extract materials / resources from the Earth
basic production
eg :aggriculture, forestry, mining, fishery
Secondary = Developed countries
Manifuctures goods using raw materials
eg: factories, industries, construction craft
Tertiary = Most developed countries (manufactured goods are imported due to cost efficiencies - high incomes = higher demand for services)
provides service to consumers, businesses & other sectors of the industry
eg : trade, banks, transport, eductaion, culture, health
Relative importance to economic sectors
Precenatge of country’s total number of workers employed in each sector
Value of output, goods, services and their proportion of total national output
Changes in sector importance
De-industralisation occurs when there is a decrease in the importance of the secondary (manufacturing sector) of industry in a country
The two sectors of industry
Private sector
Business in the private sector are owned by private individuals. They keep any profits
Public Sector
These consist of organisations, that are owned by local or national government. Profits are used within the organisations.
The Government controls:
Healthcare
provide health services to everyone
consistent standards in all areas
improve health of the population
Education
raise education standards
provide to everyone
consistent in all areas
Defense
prevent private armies
control of defense in times of danger
maintain high standards
to meet threats from other countries
Public Transport
to offer them in all areas
increase mobility of the population
reduce private car use by keeping fares low
Water Supply
whole country access to clean water
keep high standards of water
prevent monopolies making high profits
Electricity
control essential service
ensure continuous supplies
prevent monopolies from making high profits
supply of essential goods
Types of economy
Free market
low tax rates
minimal regulations on businesses
no tariffs
only few restrictions on investments
Mixed
Nearly every country in the world has a mixed economy
Consists of both private sector and public sector (state-owned) sector
Command/ Planned
Privatisation
This is when the government sells state-owned businesses to new owners in the private sector
Advanatges of privatisation
new owners - profit motive - business efficiency
increases competetion - efficiency/low prices
Govt needs cash - new owners have additional cash to invest - improved service offered by the business
decision making changes - based on efficiency & not on govt subsidies
Sale - money for the government
Disadvantages of Privatisation
Loss making services closed - private firms mainly run for profit - some people in rural areas may lose services
Job Losses - umeployment benefits extra cost to government
Risk of monopoly - higher prices
Benefits only new owners whereas public sector entities will benefit the whole country
Chapter 2 - Classification of Businesses
Sectors of Business Activity
Primary = developing countries (low income - little demand for services)
people who extract materials / resources from the Earth
basic production
eg :aggriculture, forestry, mining, fishery
Secondary = Developed countries
Manifuctures goods using raw materials
eg: factories, industries, construction craft
Tertiary = Most developed countries (manufactured goods are imported due to cost efficiencies - high incomes = higher demand for services)
provides service to consumers, businesses & other sectors of the industry
eg : trade, banks, transport, eductaion, culture, health
Relative importance to economic sectors
Precenatge of country’s total number of workers employed in each sector
Value of output, goods, services and their proportion of total national output
Changes in sector importance
De-industralisation occurs when there is a decrease in the importance of the secondary (manufacturing sector) of industry in a country
The two sectors of industry
Private sector
Business in the private sector are owned by private individuals. They keep any profits
Public Sector
These consist of organisations, that are owned by local or national government. Profits are used within the organisations.
The Government controls:
Healthcare
provide health services to everyone
consistent standards in all areas
improve health of the population
Education
raise education standards
provide to everyone
consistent in all areas
Defense
prevent private armies
control of defense in times of danger
maintain high standards
to meet threats from other countries
Public Transport
to offer them in all areas
increase mobility of the population
reduce private car use by keeping fares low
Water Supply
whole country access to clean water
keep high standards of water
prevent monopolies making high profits
Electricity
control essential service
ensure continuous supplies
prevent monopolies from making high profits
supply of essential goods
Types of economy
Free market
low tax rates
minimal regulations on businesses
no tariffs
only few restrictions on investments
Mixed
Nearly every country in the world has a mixed economy
Consists of both private sector and public sector (state-owned) sector
Command/ Planned
Privatisation
This is when the government sells state-owned businesses to new owners in the private sector
Advanatges of privatisation
new owners - profit motive - business efficiency
increases competetion - efficiency/low prices
Govt needs cash - new owners have additional cash to invest - improved service offered by the business
decision making changes - based on efficiency & not on govt subsidies
Sale - money for the government
Disadvantages of Privatisation
Loss making services closed - private firms mainly run for profit - some people in rural areas may lose services
Job Losses - umeployment benefits extra cost to government
Risk of monopoly - higher prices
Benefits only new owners whereas public sector entities will benefit the whole country