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Unlock This CourseEconomists sort all the work in an economy into three groups, called sectors. The sector a business belongs to depends on where it sits in the chain of production, from raw materials to the finished service. This topic is part of Business Economics, which is examined on Paper 1.
A quick warning. This is a different use of the word "sector" from public sector and private sector. Those describe who owns a business. The primary, secondary and tertiary sectors describe what kind of work a business does.
Key terms:
Fishing is primary sector work: taking natural resources straight from the land or sea
Farming, fishing, forestry, mining and oil drilling. These jobs start the chain. The output is a raw material or a food, such as wheat, timber, coal or fish.
Manufacturing, construction and food processing. A car plant, a bakery that makes bread from flour and a firm that builds houses are all secondary. They turn raw materials into something more useful.
Shops, banks, schools, hospitals, hotels, transport and entertainment. Nothing is extracted or made. The business sells a service, or sells goods on to the customer.
Follow one product through all three. A farmer grows wheat (primary). A mill and a bakery turn it into bread (secondary). A supermarket sells the bread to you (tertiary). A single firm can sit in more than one sector, for example a farm that also bakes and sells its own bread.
As economies develop, more people work in the tertiary sector, providing services in offices and shops
The mix of sectors is different in developing and developed economies. The general pattern is similar in many countries, and you should be able to describe it in words. You do not need exact figures.
Machines and better technology mean a farm needs far fewer workers than it once did. So the share of workers in the primary sector falls. Factories also use robots, so fewer people are needed there too. Workers move to the tertiary sector, where there are more jobs.
As incomes rise, people spend more on services such as restaurants, travel, health care and entertainment. Demand for the tertiary sector grows, so its share of output grows. People do not eat much more food when they get richer, so the primary sector's share of output falls.
Some developed economies buy many of their manufactured goods from other countries, where making them can be cheaper. That is another reason their secondary sector may shrink. Notice that a sector can produce more in total and still have a smaller share, because the other sectors have grown faster.
In Country Alva, 60 out of every 100 workers farmed in 1960, 15 worked in factories and 25 in services. By 2020, 4 farmed, 18 worked in factories and 78 in services. (These numbers are made up.) Describe the change.
The primary sector's share of employment fell sharply (60 to 4). The tertiary sector's share rose a lot (25 to 78). The secondary sector rose a little. This fits a country that has moved from developing to developed.
Country Delmar has a growing economy. The table shows the share of workers in each sector (the shares add up to 100%). The figures are made up for practice.
| Sector | 1980 | 2020 |
|---|---|---|
| Primary | 50% | 12% |
| Secondary | 20% | 28% |
| Tertiary | 30% | 60% |
(a) Identify one example of a primary sector business. [1 mark]
(b) State which sector had the largest share of workers in 1980. [1 mark]
(c) Explain why the share of workers in the tertiary sector may have risen as Delmar became richer. [4 marks]
(a) A fishing company, a farm or a coal mine. (1)
(b) The primary sector, with 50% of workers. (1)
(c) As incomes rise, people spend more on services such as restaurants, health care and travel (1). So demand for services grows (1) and tertiary businesses take on more workers to meet it (1). At the same time, machinery on farms means fewer workers are needed in the primary sector, so workers move to service jobs (1).
In part (c), link each point with "so" or "because". A list of facts about rising incomes will not earn the explanation marks. Show the chain from higher incomes to higher demand to more jobs.