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Factors of production and sectors
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Producing anything needs resources. Economies also change in what kind of work they do as they develop.
Factors of production
Land: natural resources (land, minerals, water, fish).
Labour: the human effort used in production.
Capital: man-made goods used to produce other goods, such as machinery and buildings.
Enterprise: the entrepreneur who organises the other factors and takes risks.
Labour: the human effort used in production.
Capital: man-made goods used to produce other goods, such as machinery and buildings.
Enterprise: the entrepreneur who organises the other factors and takes risks.
Sectors of the economy
Primary: extracting raw materials (farming, mining, fishing).
Secondary: manufacturing and construction.
Tertiary: services (retail, banking, tourism, education).
Secondary: manufacturing and construction.
Tertiary: services (retail, banking, tourism, education).
Changes over time
Developing economies usually have a large share of employment and output in the primary sector.
As economies develop, the secondary sector grows (industrialisation), then the tertiary sector becomes the largest.
Most developed economies have the majority of employment in the tertiary sector.
As economies develop, the secondary sector grows (industrialisation), then the tertiary sector becomes the largest.
Most developed economies have the majority of employment in the tertiary sector.
A country's share of workers in farming falls from 60% to 20% over 50 years while services grow. What is happening?
- Primary employment falls.
- Tertiary employment rises.
Answer: The economy is developing, shifting from primary to tertiary.
Factors: land, labour, capital, enterprise. Sectors: primary, secondary, tertiary. Developing economies rely more on the primary sector; developed economies on the tertiary sector.
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