Chap 2 bs

CLASSIFICATION OF BUSINESSES
SYLLABUS EXPECTATION
Economic sectors in terms of Primary,
Secondary and Tertiary sectors:
Basis of business classification, using examples to illustrate the classification
Reasons for the changing importance of business classification, e.g. in
developed and developing economies.
Classify business enterprises between

private sector and public sector in a mixed
economy
Economic Activity
All activities that
contributes to the flow
of goods and services
in an economy.
Classification of businesses based
on their economic activity
Businesses can be classified into three based on
the nature of their economic activity
Primary sector businesses
Secondary sector businesses
Tertiary sector businesses

Primary sector businesses
Businesses that are engaged in the production of raw
materials for the secondary sector businesses come under
Primary sector. These businesses use or extract natural
resources in order to make these raw materials.
Eg. Farming, Fishing, Mining, etc.
In an developing country the majority of the people will be
working in the primary sector.
Secondary sector business
Businesses that are engaged in the manufacturing of

goods by using the raw materials produced by the
primary sector is called secondary sector business.
Eg. All manufacturing businesses
In a developed country the majority of its citizens
will be working in the secondary sector businesses.
Tertiary sector business
Businesses that are engaged in providing services to
other businesses and to the community at large
comes under Tertiary sector business.
Eg. Retail and Whole sale out lets, banks, hospitals,

IT companies, Insurance Co., etc.
In a most developed country the majority of its

citizens will be working in the Tertiary sector
businesses.
Developing country
The economic activities of any country can be classified under
three heads – Primary sector, Secondary sector & Tertiary sector.
In a developing country the percentage of businesses in the
primary sector will be more compared to other two sectors.
So the economic activity in a developing country could be as
follows.
50% of the businesses will be in the primary sector,
35% of the businesses will be in the secondary sector, and
15% of the businesses will be in the tertiary sector.
Sometimes UN will categorize this group as under developed
countries.
As per UN, Afghanistan, Angola, Congo Repub.,Liberia, Somalia,
etc. are the names of few countries that come under this
Developed country
three heads – Primary sector, Secondary sector & Tertiary
sector.
In a developed country the percentage of businesses in the
secondary sector will be more compared to other two sectors.
So the economic activity in a developed country could be as
follows.
As per UN, Hong Kong, Israel, Singapore, South Korea, Taiwan,
etc. are the names of few countries that come under this
category.
Most developed country
three heads – Primary sector, Secondary sector & Tertiary
sector.
In a Most developed country the percentage of businesses in
the tertiary sector will be more compared to other two sectors.
So the economic activity in a Most developed country could be
as follows.
As per UN, Norway, Australia, Germany, Finland, Denmark,
Greece, etc. are the names of few countries that come under
this category.
Different Economic systems
There are three different types of
economic systems that exist in the
world.
Market economy
Command or Planned economy
Mixed economy
Market economy
In a market economy all goods and services are produced by
Private sector and Government will not interfere with the
production process. The demand and supply determines the
price of the product. There is high chance of market failure
as there could be shortage of merit goods and over supply of
demerit goods. Market might also fail because prices of
merit goods might go up making it unaffordable for the
common man, as there is no Government control.
There is no country with a perfect market economy. But
there are economies which are closer to the concept of
market economy –
Eg. Hong Kong, Singapore, New Zealand, Switzerland, Australia, USA,
etc.
Command/ Planned economy
In this type of economy there is no private
ownership. Everything belongs to the government
and they will decide what to produce , how to
produce, for whom and how much to produce, etc.
Private sector is completely absent in this economy.
The command economy is a key feature of any
communist society. Cuba, North Korea, and the
former Soviet Union are examples of countries that
have command economies, while China
maintained a command economy for decades before
transitioning to a mixed economy that features both
Mixed economy
In this type of economy both Private sector and Public
sector plays an important role in the production of
goods and services.
Private sector is free to produce goods and they do so
according to the demand in the market. Merit goods
are produced both by Private and Public sector.
Government controls the production of demerit goods
by using rules and regulations. Public sector will also
provide public goods for the well being of its citizens.
Chances of Market failure is minimized through
Government involvement.
CLASSIFICATION OF BUSINESSES
SYLLABUS EXPECTATION
Economic sectors in terms of Primary,
Secondary and Tertiary sectors:
• Basis of business classification, using examples to illustrate the
classification
• Reasons for the changing importance of business classification,
e.g. in developed and developing economies.
Classify business enterprises between private

sector and public sector in a mixed economy

Chap 2 bs

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CLASSIFICATION OF BUSINESSES

Classify business enterprises between

Primary sector businesses

Secondary sector businesses

Tertiary sector businesses

Businesses that are engaged in the manufacturing of

Eg. Retail and Whole sale out lets, banks, hospitals,

In a most developed country the majority of its

Classify business enterprises between private

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