By the end of this chapter, you should be able to:
•Classify entities into primary, secondary and tertiary sectors •Explain features of public and private business
•Understand the different forms of merger and take-over
•Compare methods that measures the size of a business
Levels of Economic Activity
Example – Stages in the production and sale of a wooden desk 2.1The Stage of Production
You may have a rough idea on how a wooden desk is processed into a final product for sale, but do you know that the production is divided into a few stages?
Primary stage – Extracts and uses the natural resources of the earth, Such as farming, fishing, forestry.
Secondary stage – Manufactures goods using the raw materials provided by the primary sector, Such as building, aircraft making, computer assembly and baking.
Tertiary stage – Provides services to consumers and the other sectors of industry, Such as transport, banking, insurance, hotels and hairdressing.
Which sector of industry do you think is important in Malaysia? It also depends on what is meant by “important” to the phases of growth in the country – developing or well developed.
Do you know?
De-industrialization occurs when there is a decline in the importance of secondary, manufacturing sector of industry in a counter. This happens when the tertiary/service sector become the “important” contributor to growth of the country at that point.
2.2Public and Private Sectors of Industry
3 different types of economic system which are used by countries to manage their resources as efficiently as possible: 1. Free market economy.
2. Command or planned economy.
3. Mixed economy.
Free market economy:
In this economy, all resources are owned privately. That means, there is no government control over the factors of productions. In general, all businesses focus on making profit. The prices of goods are influenced by demand and supply of goods.
Consumers are free to decide what they buy
*Workers are encouraged to work hard because there is low or no taxation. *Very competitive, which can lead to low prices.
*New businesses are encouraged.
*No government control.
Command or planned economy:
This is when the Government take controls the use of resources. Individuals may not have the rights to own any private property at all. The government will decide what to produce and how much to produce. Consumers will have limited choices on what to buy and jobs contribute. The common areas that government owned industries are such as health care, education, defense, public transport, water supply, electricity supply etc. - Advantages:
* There should be work for everybody because its run by the Government, which look over the society’s welfare. *Eliminate wastage
*Less incentive to work.
*The government may not produce goods which people want to buy. *Lack of profit motive, which may results in low efficiency.
This type of economy combines both free market economy and command economy features, which is the most common type of economy applied around the world, for instance, Malaysia itself is considered a mixed economy country.
With both private and public economy, a country may a certain extent of competitiveness while make sure things is under control.
Governments sold off businesses they previously owned to new owners in the private sector.
Arguments in favour of privatisation:
- New owners aims for profit, run the business efficiently. - Keep the price low.
- Additional capital.
- Raises money for the government.
X Arguments against of privatisation: