The Many Faces of the Economy: Understanding the Various Sectors

 Sectors of the Economy

What is Economic Activities?

Economic activities mean activities that generate income. Economic activities are broadly grouped into various sectors.  

What is Sector?

The sector is the area of the economy where business activity, products, or services into the same group. It is beneficial for economists to analyze economic activity that's why the economy can be divided into different areas called sectors. Primary, Secondary & Tertiary is the type of sectors in the economy. Sector analysis provides an indication of whether an economy is expanding. 

When economic activities mainly depend upon natural resources or utilization of earth resources (land, water, vegetation, materials & minerals), these activities come under the primary sectors, it is also called the extraction sector. For example agriculture & its related activities, Mining, and fishing under these sectors. People who work in this sector are called red-collar workers. 

When the main activity involves processing, manufacturing, and construction, these activities come under secondary sectors. This sector adds value to natural resources by transforming raw materials into valuable products. For example, all industrial production where physical goods are produced comes under this sector. The secondary sector includes the following business activities:

• Automobile production
• Textile
• Chemical engineering
• Energy Utilities

People engaged in these activities are called blue-collar workers. 

When the activity involves services then it is part of the tertiary sector. For example, Technology, IT, financial services, etc. comes under this sector. It provides services to businesses and consumers by selling the goods that are manufactured by companies in the secondary sectors. The type of services are:

• Retail sales
• Tourism
• Restaurants
• Insurance 
• Banking
• Healthcare services

Tertiary jobs are called white-collar jobs. 

Interdependence of sectors is very important to understand, let's understand with a simple example:

• A cold drink contains water, sugar, and artificial flavor. 
• Assume if sugarcane production is less or no production then raw materials of cold drink sugar will become shortage or difficult to fulfill the demand, which also increases the cost of sugar to cold drink manufacturers.
• Transporting sugarcane to sugar mills and sugar to the cold drink plant needs the services of a transporter. 
• A farmer requiring fertilizers and seeds will produce in the factory and deliver by any transporter to the farmer's doorstep. 
• Every step requires money & banking system. 

Other sectors of the economy

• Sectors based on work condition
• Organized sector: Carrying out all activities through a system & follows the law of the land is called an organized sector. 
• Unorganized sector: evade most of the laws and don’t follow the system come under the unorganized sector
• Sectors in terms of ownership
• Public Sector: Companies that are run and financed by the Government comprise the public sector.
• Private Sector: Companies that are run and financed by private people comprise the private sector. Companies like Hero Honda and tata are from the private sector.
• Quinary sector: It is part of the economy where top-level decisions are made. It includes government which passes legislation and is the top decision-maker in the industry.  
• Digital Economy: An economy in which digital computing technology are utilized in economic activities. It is also known as the internet economy.  

  

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Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on Investment or recommend buying and selling any stock