4.3 (Part 2) Economy

Economies of the World The economy is a system that includes all of the activities that people and businesses do to earn a living. Countries use a mix of different economic activities and systems. Geographers divide economic activities into four levels.

Four Levels of Economic Activity Primary Industry People earn a living by providing raw materials (materials that are not changed from their natural state) or natural resources to others. Examples include farming grains, cow’s milk, vegetables; fishing for seafood; and mining coal, iron, etc.

Secondary Industry Use natural resources or raw materials to manufacture (manufacturing = the process in which raw materials are changed into finished goods) something new Example: automobile manufacturers use steel and other raw materials to build cars and trucks; cheese-makers use cow’s milk to make cheese; people who make furniture use wood to build tables & chairs

Tertiary Industry Goods and services are exchanged Includes people who sell the products made in secondary industries (example: the grocery store owner who is selling the cheese or the furniture store selling the tables and chairs or the car dealership selling the cars) and people who provide services rather than goods, such as health care workers, mechanics, teachers, doctors, TV personalities.

Quaternary Industry Involves the research and distribution of information People work with information rather than goods and often have specialized knowledge and skills. Examples; inspectors who are inspecting finished cheese, engineers who are testing the cars, also people like architects, lawyers, & scientists

Economic Systems There are 3 types of economies that exist in the world.

Traditional Economy Definition: System in which people grow their own food and make their own goods Trade may take place through barter, (definition: the exchange of goods without the use of money.) Often found in rural and remote communities

Market Economy The most common economic system used around the world. (The U.S. uses this type of system) Definition: System based on private ownership, free trade, and competition Individuals and businesses are free to buy and sell what they wish. Prices determined by the supply and demand for goods Sometimes called capitalism

Command Economy Definition: System in which the central government makes all economic decisions Government decides what goods to produce, how much to produce, and what prices will be. Communist governments have an economy close to a command economy because they own and control most businesses in their countries.

Economic Development Economic systems and activities affect a country’s economic development, or the level of economic growth and quality of life.

Economic Indicators Economic Indicators: measures of a country’s wealth used by geographers to decide if a country is developed or developing One measure used is gross domestic product (GDP)—(the value of all goods and services produced within a country in a single year.)

Other indicators include a country’s per capita GDP (the total GDP divided by the number of people living in a country), level of industrialization (types of industries and technology), and overall quality of life (health care and education).

Developed and Developing Countries Developed countries are countries with strong economies and a high quality of life; usually have high per capita GDP & a high level of industrialization Examples: the United States & Germany

Developing countries are countries that have less productive economies and a lower quality of life; usually have lower per capita GDP & less access to health care or technology & most residents of these countries live in rural areas. 2/3 of the people in the world live in developing countries