Cambridge IGCSE
Business Studies
1.2 Classification of
Businesses
PRIMARY SECTOR
SECONDARY SECTOR
TERTIARY SECTOR
DEVELOPING COUNTRIES
DEVELOPED COUNTRIES
DE-INDUSTRIALISATION
MIXED ECONOMY
PRIVATE SECTOR
PUBLIC SECTOR
CAPITAL
PRIVATISATION
DEFINITIONS FOR 1.2 CLASSIFICATION OF
BUSINESSES
Primary Sector of industry extracts and uses natural
resources of the earth to produce raw materials used by
other businesses.
Secondary Sector of industry manufactures goods using
raw materials provided by the primary sector.
Tertiary Sector of industry provides commercial services to
consumers and other sectors of industry.
Developing Countries are where manufacturing industry
has only recently been established, thus Primary Sector
output and employment is higher than Secondary and
Tertiary.
Developed Countries are where manufacturing industries
are long established, so Secondary and Tertiary Sectors
will employ more workers and have higher output than the
Primary Sector employment and output.
De-industrialisation occurs when there is a decline in the
importance of the secondary manufacturing sector of
industry in a country
Mixed Economy has both a private sector and a public
sector.
Private Sector is businesses not owned by the
Government, free to make their own decisions about what,
how + price of products.
Public Sector is Government owned and state controlled
businesses, where products & prices are set by public
authorities in the Government.
Capital is the money invested into a business by the
owners.
Privatisation is when a Government owned + controlled
public-sector business is sold to a private sector business.
In much of Europe + Asia water supply, electric supply +
public transport has been privatized.
EXAM-STYLE QUESTIONS – Paper 1
Ade’s Engineering Company (AEC) makes parts for cars & trucks. These
are sold to car manufacturers in many countries. The parts include metal
brake components & rubber seals to fit around windows. AEC operates in
Country X which, until a few years ago, had an economy dominated by
agriculture & coal mining. Over the last 20 years the relative importance of
the primary sector has declined. To be successful AEC requires natural
resources to make car parts & the services provided by other businesses.
Consumer incomes are rising rapidly in Country X.
1(a) What is meant by ‘primary sector’? [2]
Primary sector is a business that uses natural resources to produce
raw materials used by other businesses.
1(b) Identify two examples of services that a business such as AEC
requires. [2]
Transport is a service needed by AEC, to deliver its car parts.
Insurance is another service AEC will require, to protect the factory
and its contents in case of an emergency or disaster.
1(c) Identify and explain two reasons why a business such as AEC could
not be successful without other firms providing natural resources. [4]
AEC needs steel to make its car parts and steel production requires
natural resources like coal and iron ore. Without these natural
resources, AEC could not successfully make car parts from steel.
AEC needs rubber to make its seals too. Oil is needed to produce
rubber and, like coal and iron ore, oil is a natural resource. Without
oil, AEC would have no rubber for seals.
1(d) Identify and explain two likely reasons why the relative importance of
the primary sector of Country X’s economy has declined. [6]
Natural resources are declining over time + coal reserves, especially,
are running out. This means that primary sector production will fall +
become less important to X’s economy. A lack of coal limits
secondary + tertiary sector’s capacity to invest in raw materials
made using coal, hence primary sector importance decreases.
The value of tertiary sector output is rising (faster than primary) due
to higher incomes in Country X. This means that consumers will
spend a higher proportion of their wages on services within the
tertiary sector. Thus, primary sector in Country X will becomes less
important compared tertiary.
1(e) A Government Minister in Country X recently said “The secondary
sector of industry will always be more important than the tertiary sector to
our economy”. Do you agree with this? [6]
The secondary sector of industry manufactures goods using raw
materials provided by the primary sector of industry. An example is
a car manufacturer using steel from natural resources like coal +
iron ore. The tertiary sector of industry provides commercial
services to consumers + other sectors of industry. An example of
this is a freight company making deliveries for secondary sector
manufacturers.
Secondary will be more important if Country X invests in secondary
industries, like car manufacture, as cars are a standard purchase
rather than a luxury. If incomes continue to rise, however,
consumers will spend more of their wages on tertiary sector
services, like tourism, so Country X may lose competitiveness in
secondary goods. Overall, then, secondary success leads to tertiary
success + importance of the former decreases proportionally as the
latter increases. Secondary industries thrive if Country X specializes
in 1 or 2.