Lesson Objective: The Meaning of 'An Economy' (2.1)
What do you understand by the word 'economy'? What is an 'economy'?
An economy is the measure of all the resources and wealth in a country - everything produced and purchased within a country.
An economy is the place where business activity happen.
An economy is made of businesses in different sectors (the sectors of an economy):
The primary sector of an economy is based on activities that extract raw materials from nature (land or sea) as for example agriculture or fishing.
The secondary sector is where natural resources are turned into finished goods through manufacturing. Turning the cotton into thread and then into a t-shirt.
Finally, the tertiary sector represents the service sector. This is the sector where hospitals, schools, banks, and transportation companies, for example, operate.
Can you think of other examples in each of the 3 sectors?
It is important that we understand that these 3 separate sectors are interdependent on each other and without one another they would struggle/cease to exist:
Case Study (p. 23)
What do you think is the difference between developing and developed countries?
One of the most common ways to measure a country's development is by looking at its level of industrialization (secondary sector).
The standard and living conditions is another important measure to asses a country's development level.
The process of industrialization happen when a country jumps from a primary based economy to becoming secondary based economy. On the other hand, deindustrialization is when a country goes from secondary economy to a tertiary economy or sometimes even backwards to being a primary economy.
To finalize, let's look into the reasons countries go through industrialization and deindustrialization:
1. Change in Consumer Behavior:
Change in consumers' income leads to change in spending patterns (demanding for more industrialized products or for services);
Better education leads customers to expect better products as they are able to buy products around the world with the use of internet;
Increased spare time leads customers to look further for entertainment and leisure activities (services)
2. Change in Business Behavior:
Businesses willing to take on international opportunities for growth;
The need to provide better services for their employees (e.g. canteens, trainings, etc.) leads to an increase in demand for those services;
Business needs for financing increases the demand for banking services.
To-Do-List
Test Yourself (p. 25) - Answer all questions.
Chapter 2 - Classification of Businesses
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