Economic Sectors, Concepts, and Industrial Types
Economy
The economy is the process or system by which goods and services are produced, sold, and bought in a country or region.
The Three Sectors of the Economy
Primary sector: Agriculture, the extraction of raw materials – fishing, farming, mining, forestry, agriculture…
Secondary sector: Industry, manufacturing industry, in which raw materials are turned into finished products – industry workers, plumbers, carpenters, electricians, factory managers…
Tertiary sector: The commercial services that help industry and distribute goods to the final consumer. They don’t produce goods, but they offer services – transport drivers, waiters/waitresses, shop assistants, doctors, nurses, teachers, artists, musicians, lawyers…
Economic Concepts
Active Population
People aged 16 or older who are working for a salary or are seeking employment:
Employed: People between 16 and 64 who receive remuneration (salaries).
Unemployed: People aged 16 and older who are not in paid employment but who are available for work and are seeking paid employment.
Inactive Population
People who are not working or looking for work either, even though some of them may be of working age.
Retired: People who are over 65 that do not work and are getting retirement pay (pension).
Home-makers: People who have decided not to work / or have never worked and they stay at home (without remuneration).
Students: Group of people that even though they are of working age, they don’t work as they are studying full time.
Disabled: People that do not (can’t) work because they have a physical or a psychological disability. They may (or not) get a benefit pay (pension or allowance).
Business System
Inputs: Resources we need to produce the product – tree
Process: The process that we make with the inputs to create the final product – factory
Output: The final product or service – paper
Business Concepts
Profits: Portion of money received that remains after paying for materials, wages, and investments.
Wages/salary: Payments to employees in exchange for their labor.
Suppliers: People who provide materials.
Revenue: Money received by the company for the sale of goods or services.
Expenses: Cost of all the resources you need in order to produce goods.
Energy tariff: The cost of the energy necessary in a production plant. It can be electricity, gas, oil, etc.
Materials: Raw or semi-processed products necessary to produce new products.
Machinery and equipment: Machines, tools, computers, etc. necessary to produce the product.
Taxes: Impuestos
Location of a Factory
The main factors that determine the location of an industry:
Transport network is needed to move raw materials, people, and goods.
A market is a place where the manufactured goods are sold.
Energy is needed to work machines.
Government policy is the money or support a government gives in order to determine the location of a factory in a certain place or country.
Raw materials are natural resources from which goods are made.
Workforce is people who work in factories.
Capital is the money needed to buy the raw material and equipment.
Site is the place you need in order to build the factory.
Industry Types
According to Ownership
Public: The owner of the company is the Government. Usually, the employees are ‘public servants’. They can work in public hospitals, public schools, or in the administration.
Private:
Individually owned: A company that belongs to a single individual. This owner takes all the decisions and is responsible for its profits and losses.
Cooperative: A company formed by a group of people united for a common purpose, which could be economic, cultural, or social. Membership is voluntary and free to all, and each member pays the same amount to join. When making decisions, the rule is ‘one member, one vote’.
Public limited company or corporation (PLC): The initial capital of this company is distributed in ‘shares’. Major decisions are voted on at shareholders’ meetings, and the shareholders who own more shares have more votes. The profits are distributed according to the number of shares, and if there are losses, the shareholders only lose the money they spent when they bought the shares.
According to Number of Employees
Small industries: Less than 50 employees.
Medium-sized industries: Between 50 and 100 employees.
Large industries: More than 100 employees but less than 1000.
Very large industries: More than 1000 employees.
According to Goods Produced
Heavy industry: It transforms raw materials into semi-finished products that are then used in other industries.
Characteristics:
Coal, iron, copper, bauxite, petroleum, or natural gas are some of the chief raw materials used in this industry.
Usually located near mines, and energy sources, or near ports of entry for raw materials to reduce the transportation price of raw materials…
Very polluting, are usually located outside towns and cities.
Metallurgical or steel industry and heavy chemical industry are examples of this.
Requires high investment in raw materials and energy sources.
Capital goods industry: It transforms semi-finished products manufactured by heavy industry into finished goods and products for use in other industries.
Characteristics:
The most important raw materials they use are iron, steel, and other metals produced by basic industry.
Construction materials, industrial and agricultural machinery, transport means, paper, or aerospace are examples of this.
Light industry: Provides products for direct consumption.
Characteristics:
Until recent decades, usually located near cities and transport links.
It transforms goods for direct consumption by transforming products of basic industries or agriculture / fishing, etc.
Food, textile, automobile, light chemical products (cosmetics, plastics, etc.) are examples of this.
High technology industry: Industries whose processing techniques usually involve micro-electronics.
Characteristics:
They are freer to choose their location but they like to be located near motorways and airports.
They need very few people, but highly qualified and skilled workers.
Examples
Caf s.a.: Very large, private (public limited corporation), capital goods industry.
Eroski: Very large, private (cooperative), light or consumer goods industry.
Gipuzkoako Foru Aldundia: Very large, public, they give services.