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BSLW 1021 (37)
Lecture

CH2_Business Activity Types.docx

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Department
Business Law
Course
BSLW 1021
Professor
Daniel Frost
Semester
Fall

Description
Chapter 2: Types of business activity Levels of economic activity In order for products to be made and sold to the people, it must undergo  3 different production processes. Each process is done by a different  business sector and they are: • Primary sector: The natural resources extraction sector. E.g. farming,  forestry, mining... (earns the least money) • Secondary sector: The manufacturing sector. E.g. construction, car  manufacturing, baking... (earns a medium amount of money) • Tertiary sector: The service sector. E.g banks, transport, insurance...  (earns the most money) Importance of a sector in a country: • no. of workers employed. • value of output and sales. Industrialisation: a country is moving from the primary sector to the  secondary sector. De­industrialisation: a country is moving from the secondary sector to  the tertiary sector. In both cases, these processes both earn the country more revenue. Types of economiess Free market economy: All businesses are owned by the private sector. No government  intervention. Pros: • Consumers have a lot of choice • High motivation for workers • Competition keeps prices low • Incentive for other businesses to set up and make profits Cons: • Not all products will be available for everybody, especially the poor • No government intervention means uncontrollable economic booms or  recessions • Monopolies could be set up limiting consumer choice and exploiting  them Command/Planned economy: All businesses are owned by the public sector. Total government  intervention. Fixed wages for everyone. Private property is not allowed. Pros: • Eliminates any waste from competition between businesses (e.g.  advertising the same product) • Employment for everybody • All needs are met (although no luxury goods) Cons: • Little motivation for workers • The government might produce things people don't want to buy • Low incentive for firms (no profit) leads to low efficiency Mixed economy: Businesses belong to both the private and public sector. Government  controls part of the economy. Industries under government ownership: • health • education • defence • public transport • water & electricity Privatisation Privatisation involves the government selling national businesses to the  private sector to increase output and efficiency. Pros: • New incentive (profit) encourages the business to be more efficient • Competition lowers prices • Individuals have more capital than the government • Business decisions are for efficiency, not government popularity • Privatisation raises money for the government Cons: • Essential businesses making losses will be closed • Workers could be made redundant for the sake of profit • Businesses could become monopolies, leading to higher price Com
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