IGCSE Business Studies: Classification of Businesses

Questions and Answers

What does the primary sector do?

Inputs capital into the economy

Extracts natural resources and produces raw materials (correct)

Provides services to consumers

Manufactures finished goods

What is the role of the secondary sector?

Manufactures finished or part finished goods (correct)

Provides services

Extracts natural resources

Controls public services

What does the tertiary sector provide?

Capital for businesses

Services to consumers and other sectors (correct)

Natural resources

Finished goods

What factors determine the importance of the primary, secondary, and tertiary sectors?

The percentage of total workers employed in each sector and the value of output of products as a proportion of total national output. Signup and view all the answers

What are some reasons for the changing importance of the three sectors?

Primary resources become depleted, losing competitiveness in manufacturing to newly industrialized countries, and as living standards rise, consumers tend to spend more on services than manufactured products. Signup and view all the answers

What is meant by capital in a business context?

Money invested in the business by owners. Signup and view all the answers

What is de-industrialization?

A decline in the importance of the secondary sector in an economy. Signup and view all the answers

What is a mixed economy?

An economy with both private and public sector activity. Signup and view all the answers

What constitutes the public sector?

Government or state-owned/controlled businesses. Signup and view all the answers

What defines the private sector?

Businesses not owned by the government. Signup and view all the answers

Which of the following areas does the government control?

All of the above Signup and view all the answers

What is privatization?

Selling some public sector companies to private sector investors. Signup and view all the answers

What is interdependence in the context of business sectors?

Businesses in each of the three sectors rely on each other. Signup and view all the answers

Study Notes

Classification of Businesses

Primary Sector: Engages in extraction of natural resources; produces raw materials such as crude oil, iron ore, and agricultural products.
Secondary Sector: Involves manufacturing; transforms raw materials into finished or semi-finished goods.
Tertiary Sector: Focuses on services rather than goods; provides support to consumers and other industries.

Importance of Business Sectors

Sector importance is measured by:
- Percentage of total workforce employed in each sector.
- Value of output as a share of total national production.

Changing Importance of Sectors

Primary sector may decline due to resource depletion.
Manufacturing competitiveness can decrease with emergence of countries like China.
Rising living standards shift consumer spending towards services, reducing demand for manufactured goods.

Key Economic Concepts

Capital: Refers to investment funds provided by owners to support business operations.
De-industrialization: Represents a decline in the secondary sector's role within the economy.

Types of Economies

Mixed Economy: Combines both public and private sector activities; integrates government and privatized enterprises.

Public vs Private Sector

Public Sector: Comprises businesses owned or managed by the government, which determines production, pricing, and distribution of some services (e.g., healthcare and education) funded by taxes.
Private Sector: Consists of independently owned businesses that operate primarily for profit, responding to market demands.

Government-Controlled Businesses

Key areas under government control include health, education, defense, public transport, water supply, and electricity supply.

Privatization

Process of transferring ownership of public sector enterprises to private investors; aims to enhance efficiency and increase investment capital.

Interdependence among Sectors

Sectors are interlinked, with reliance on each other for various functions; for example, primary and secondary sectors depend on the tertiary sector for financial services.

Description

This quiz focuses on the classification of businesses into primary, secondary, and tertiary sectors. Each sector is defined with examples showcasing their role in the economy. Perfect for IGCSE students to test their understanding of business sectors.