Cambridge IGCSE Business (0264) syllabus reference: 1.2.1
Success criteria - by the end of this topic you can:
- classify businesses into the primary, secondary and tertiary sectors
- explain why the importance of each sector changes as countries develop
- compare the private sector and the public sector
Primary, secondary and tertiary sectors
The three economic sectors
| Sector | What it does | Examples |
|---|
| Primary | Extracts natural resources from the earth or sea | Farming, fishing, mining, forestry, oil drilling |
| Secondary | Manufactures or processes raw materials into finished products | Car factories, bakeries, construction, steel mills |
| Tertiary | Provides services to consumers and businesses | Banks, shops, hotels, transport, IT services, hospitals |
Businesses in different sectors depend on each other in a chain of production: cotton is grown (primary), made into shirts (secondary) and sold in shops (tertiary).
Changes in the importance of sectors
- In less developed economies most workers are in the primary sector (especially farming).
- As countries industrialise, the secondary sector grows.
- In developed economies the tertiary sector employs most people and produces most output, as incomes rise and people spend more on services.
Real-world example India's IT and services industries (TCS, Infosys, banking, telecom) have grown rapidly, so the tertiary sector now produces the largest share of India's output, even though agriculture still employs a large share of workers.
Private sector and public sector
Key terms
Private sector - businesses owned and controlled by private individuals or groups, usually aiming to make a profit.
Public sector - organisations owned and controlled by the government, usually providing essential services.
Comparing the sectors
| Private sector | Public sector |
|---|
| Owned by | Individuals, partners, shareholders | Government (central or local) |
| Main aim | Usually profit | Provide a service to everyone, often at low or no cost |
| Finance from | Owners, loans, profits | Taxes and government borrowing |
| Examples | Reliance, Zomato, local shops | Indian Railways, government schools and hospitals |
Exam tip
Do not confuse the public sector (government-owned) with a public limited company (a private sector business whose shares are sold to the public).
Analysis chains - use these to build 6 and 8-mark answers
- Rising incomes [k] - people spend more on services [an] - the tertiary sector grows [an] - more jobs in banking, retail and tourism [an].
- Public sector ownership [k] - service provided even where it is unprofitable [an] - everyone can access it [an] - but taxpayers pay for losses [an].
Check your understanding - exam-style practice
1. Identify one example of a business in each sector. [3]
2. Explain one advantage and one disadvantage of a service being in the public sector. [6]
3. Do you think the primary sector will always become less important as a country develops? Justify your answer. [8]
Write your answers, then check them against these notes and the Exam Technique Sheet.