Unit 1.2 Classification of Businesses

Question 1

Primary Sector

Answer 1

• Industry that extracts and uses the natural resources of the earth to produce raw materials
• Used by the Secondary Sector

Question 2

Secondary Sector

Answer 2

• Industry that manufactures goods using the raw materials
• Provided by the Primary Sector

Question 3

Tertiary Sector

Answer 3

• Industry providing services to customers and other businesses
• Goods that have been made have to get to the final customer

Question 4

Industrialisation

Answer 4

Process of transforming the economy of a nation or region from a focus on agriculture to a reliance on manufacturing

Question 5

De-industrialisation

Answer 5

Process of a decline in the importance of the secondary sector and the growth of tertiary sector

Question 6

Why does industrialisation occur?

Answer 6

• Depletion in natural resources
• Increase demand in manufactured goods

Question 7

Why does de-industrialisation occur?

Answer 7

• Increase in total wealth leading to a rise in living standards and a change in demand
• Higher demand for services

Question 8

Private Sector

Answer 8

• Businesses that are fun by private individuals or groups
• Main goal is to make PROFIT

Question 9

Public Sector

Answer 9

Part of the economy run by the GOVERNMENT

Question 10

Mixed Economy

Answer 10

Combination of both Private Sector and Public Sectors

Question 11

Advantages of the Private Sector

Answer 11

• High efficiency and lower Average costs
• Competition is encouraged hence lower prices for customers
• Increased innovation and the development of better quality products

Question 12

Disadvantages of the Private Sector

Answer 12

• Production of HARMFUL goods and services due to the PROFIT MOTIVE
• Workers may lose jobs because the businesses do not care about employment rates in countries, may lead to increased unemployment
• Negative Externalities e.g Pollution

Question 13

Advantages of the Public Sector

Answer 13

• Businesses are funded by the government, hence ESSENTIAL goods and services may be provided with little to no cost
• Encourages increased job creation
• Public Goods e.g. street lighting

Question 14

Disadvantages of the Public Sector

Answer 14

• Low efficiency and WASTAGE of resources
• No Competition = Low Quality Goods & Services
• Little or NO INNOVATION = Less VARIETY of goods and services

Question 15

Nationalisation

Answer 15

Government taking over a privately run business or industry

• Usually happens during recessions
• Important business or industry decreasing
• loss of thousands of jobs and income tax

Question 16

Privatisation

Answer 16

The transfer of ownership, management and control of the public sector enterprises to the private sector

• Increases efficiency