Summary
The classification of businesses involves understanding the different sectors of economic activity and the types of economies. Businesses can be classified into primary, secondary, and tertiary sectors, and economies can be mixed, market, or command.
- Primary sector — involves the extraction and use of natural resources to produce raw materials. Example: Mining companies extracting minerals.
- Secondary sector — involves manufacturing goods using raw materials from the primary sector. Example: Factories producing cars.
- Tertiary sector — involves industries that provide services to consumers and other sectors. Example: Retail stores selling products.
- Mixed economy — an economy with both private and public sectors. Example: The UK economy.
- Privatization — the switch from state-owned businesses to privately owned businesses. Example: A government-owned railway being sold to a private company.
Exam Tips
Key Definitions to Remember
- Primary sector
- Secondary sector
- Tertiary sector
- Mixed economy
- Privatization
Common Confusions
- Mixing up the roles of the primary, secondary, and tertiary sectors
- Confusing mixed economy with market or command economy
Typical Exam Questions
- What are the three stages of economic activity? Primary, secondary, and tertiary sectors
- What is a mixed economy? An economy with both private and public sectors
- Why might a government choose privatization? To increase efficiency and attract more capital
What Examiners Usually Test
- Understanding of the different economic sectors
- Reasons for changes in the importance of business sectors
- Differences between private and public sectors