The three main sectors of the economy are:
- Primary sector – extraction of raw materials – mining, fishing and agriculture.
- Secondary / manufacturing sector – concerned with producing finished goods, e.g. factories making toys, cars, food, and clothes.
- Service / ‘tertiary’ sector – concerned with offering intangible goods and services to consumers. This includes retail, tourism, banking, entertainment and I.T. services.
A primitive economy will primarily be based on the primary sector – with most people employed in agriculture and the production of food.
As an economy develops, improved technology enables less labour to be needed in the primary sector and allows more workers to produce manufactured goods. Further development enables the growth of the service sector and leisure activities.
Primary sector
The primary sector is sometimes known as the extraction sector – because it involves taking raw materials. These can be renewable resources, such as fish, wool and wind power. Or it can be the use of non-renewable resources, such as oil extraction, mining for coal.
In the 1920s, over one million people were employed in the UK coal industry. It was a key part of the economy. However, improved technology and the growth of other energy sources has seen a dramatic decline in this primary sector industry.
More detail on primary sector
Secondary or manufacturing industry
The manufacturing industry takes raw materials and combines them to produce a higher value added finished product. For example, raw sheep wool can be spun to form a better quality wool. This wool can then be threaded and knitted to produce a jumper that can be worn.
Initially the manufacturing industry was based on labour intensive ‘cottage industry’ e.g. hand spinning. However, the development of improved technology, such as spinning machines, enabled the growth of larger factories. Benefiting from economies of scale, they were able to reduce the cost of production and increase labour productivity. The higher labour productivity also enabled higher wages and more income to spend on goods and services.
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Service / tertiary sector
The service sector is concerned with the intangible aspect of offering services to consumers and business. It involves retail of the manufactured goods. It also provides services, such as insurance and banking. In the twentieth century, the service sector has grown due to improved labour productivity and higher disposable income. More disposable income enables more spending on ‘luxury’ service items, such as tourism and restaurants.
