ECONOMIC SYSTEMS

Economic Sectors Define the terms primary, secondary, tertiary, quaternary and quinary Why does secondary employment reach a peak in the industrial stage ? Account for the changes in the relative importance of tertiary and quaternary sectors over time.

ECONOMIC SYSTEMS Economic systems are an important part of any culture Every society (culture) must answer the basic economic questions: What to produce How to produce it Who will get what is produced

ECONOMIC ACTIVITY The “economy” refers to all the production and exchange activities that go on every day (i.e. buying and selling). This process is ongoing and is often complex and too big for us to really comprehend Economic activity can exist on many levels from a simple street market right through the to complex financial transactions between major corporations.

Global Economies Trade is the most vital element in the growth of the global economy. In 1948, 23 nations agreed to reduce tariffs on each other’s exports under the General Agreement on Tariffs and Trade (GATT). This was the first multilateral agreement. Since then there have been eight “rounds” of flobal trade talks.

Global Economies The top ten global economies according to the traditional measure, gross domestic product (GDP). Eight of the top ten are in the north or developed world. The rapid growth rates experienced by some of the largest developing countries , economists predict that they could raise their share of world output from around one sixth to almost a third by 2020.

ECONOMIC SYSTEMS & CHANGE Economic systems can change over time. Traditional systems were largely rural in nature Since the early 1980s, many countries which had a reasonable balance between public and private ownership (mixed economies). They have privatised most of their publicly owned industries on the premise that private ownership is more efficient.

REASONS FOR CHANGE Changes in income levels View the future Debt levels Unexpected changes in income Confidence in the future of the economy The level of economic activity in the world Political events around the world Natural Disasters Major sporting events Changes in prices of raw materials Changes in prices of stocks and shares on the world stock markets

INFLUENCES ON THE ECONOMIC SYSTEM Cultural influences on the economic system World view of the culture Technological level of the culture Political structure of the culture Non-cultural influences Relative location & accessibility Topography & Climate Resources available from the environment

Factors of production in all economic systems Land – real estate and natural resources – raw materials Labor – mental and physical efforts applied to “land” and “capital” to facilitate production Management or entrepreneurship – that segment of labor which organizes land, capital, and the other segment of labor to produce goods and services Capital – the tools and facilities needed for production

PHYSICAL FACTORS What does nature provide that is useful? Elements of physical place with economic significance: Climate and flora and fauna Topography: landforms Soil Rivers (nature and flow) OR lack of rivers Mineral deposits

TYPES OF ECONOMIC ACTIVITIES Primary Secondary Tertiary Quaternary Quinary

Primary Economic Activities The simplest, closest to nature, use of earth products Hunting & gathering Agriculture and animal husbandry – growing plants and harvesting the fruit and raising animals for sale Extracting minerals from the earth – various ores, crude oil, natural gas, etc. Fishing Lumbering

Secondary Activities: Manufacturing Industrial Locational Models Variable costs have important role in location decisions: transportation charges, labor rates, power costs, plant construction or operation expenses, interest rates of money, raw materials Seeking to reach a large enough market cheaply enough to produce profits Alfred Weber – placed much weight on transportation costs

Secondary Activities Continued World Manufacturing Patterns and Trends Four major industrial clusters: Eastern Anglo-America, Western and Central Europe, Eastern Europe, and Eastern Asia Post-industrial economies developing in Anglo-America and Europe (iron belt to rust belt) Significant industrial clusters are developing in other places such as Mexico – pockets of development in the “third world” High Tech Patterns – emergence of “sun belt” Electronics, robotics, less dependent on location of raw materials

Tertiary and Beyond Tertiary Services – service sector Growing sector in older, industrialized economies Has replaced secondary activities as the largest sector in the U.S. economy Beyond Tertiary – Quarternary – Advanced services Information handling, management, & research – particularly in the computer areas Specialized knowledge, high-tech skills, i.e. national accounting firms (serving a nation-wide market) Quinary – Executive decision-making Special, highly-paid skills, top executives, etc. Locate in places with the finest amenities