Ch2. Classification of businesses

Bo is a carpenter. He makes furniture from wood which he buys from his uncle. Bo sells his furniture in his own shop. Bo is involved in

• the secondary sector only.

• the primary and tertiary sectors.

• the tertiary sector only.

• the secondary and tertiary sectors.

Answer explanation

Bo is involved in the secondary sector because he turns raw materials (wood) into finished goods (furniture). He is also involved in the tertiary sector because he provides services to the final consumer (selling goods from a shop). Bo is not involved in the primary sector because he does not extract or harvest raw materials from the land or sea.

Which of the following is not an example of a primary sector business activity?

• Fishing

• Mining

• Banking

• Farming

Answer explanation

Banking is not a primary sector activity; it belongs to the tertiary sector because it provides a service to customers. Fishing, mining and farming are primary sector activities because they all involve the extraction of natural resources from the sea or land.

Is the following statement true or false?

A mixed economy has both public and private sector organisations.

• True

• False

Answer explanation

Organisations are either in the public sector (controlled by the state or government) or in the private sector (owned and controlled by individuals). An economy that has a mixture of both types of organisation is called a mixed economy.

Which one of the following is an example of a chain of production?

• Cutting diamonds, making diamond rings, selling diamond rings.

• Growing wheat, producing flour, making bread.

• Refining oil, transporting oil, operating a petrol station.

• Growing sugar cane, refining sugar, selling sugar in a supermarket.

Answer explanation

Growing sugar cane, refining sugar, selling sugar in a supermarket is a chain of production because it involves activities from all three sectors of economic activity – primary, secondary and tertiary. The other options are not examples of a chain of production because they involve only two sectors. Remember: primary sector businesses extract or harvest natural resources from the land or sea; secondary sector businesses use the raw materials extracted by the primary sector and turn them into finished goods; and tertiary sector businesses provide services to final consumers or businesses, often by selling the goods produced by the secondary sector.

The relative sizes of the primary, secondary and tertiary sectors in country X are 55%, 20% and 25%, respectively. Country X could be described as a less developed economy because

• the tertiary sector is larger than the secondary sector.

• the primary sector is the largest sector.

• the tertiary sector is smaller than the primary sector.

• the secondary sector is smaller than the primary sector.

Answer explanation

If the primary sector is the largest sector, it is likely to be a less developed country because there is lower manufacturing and service activity and the standard of living of consumers is low. If the secondary and tertiary sector are larger than the primary sector then it is likely to be a developed economy because there will be economic growth leading to a higher standard of living for consumers.

Choose the correct words to complete the following sentence.

De-industrialisation refers to the growing importance of the ....................... sector and the reduced importance of the ....................... sector

• tertiary / secondary

• primary / secondary

• secondary / tertiary

• tertiary / primary

Answer explanation

The tertiary sector becomes more important in a de-industrialised economy because there are more service industries such as tourism and finance. The secondary sector becomes less important in a de-industrialised economy because there are fewer production industries such as car manufacturing.

Put these elements of a production chain into the correct order.

• Supermarket

  Bakery

  Wheat farming

  Flour milling

• Wheat farming

  Flour milling

  Supermarket

  Bakery

• Wheat farming

  Flour milling

  Supermarket

  Bakery

• Wheat farming

  Flour milling

  Bakery

  Supermarket

................... industries

Organisations that were once privately owned but are now in the public sector

.................. sector

Organisations whose main objective is to earn profits for individuals and companies

.................... sector

Organisations controlled by the state or government