RESOURCES AND THE SECTORS OF THE ECONOMY
OBJECTIVES:

  • Classify human, capital and natural resources.

  • distinguish between renewable and non-renewable resources.

  • identify resource use for a particular production process.

  • Explain the characteristics of the primary, secondary and tertiary sectors, and the importance of each to the economy.
Production is the combining of resources to create a good or service.

A resource is the input into the production process. The resources used in the production process are referred to as the factors of production.

The factors of production
These are
  • Land - anything from the natural environment.
  • Labour - human resources.
  • Capital - Man made good used to produce other goods.
  • Entrepreneurship - a human resource that organises the factors of production.
 Land can be defined as any natural resource.
Land can be divided into two types of resources.
Renewable Resource any resource that can be replaced or replenished within our life time. As long as it is used sustainably it will not run out.
Examples include - sheep, fish, wind, water, pine trees.
Non-Renewable Resource any resource that is depletable - it cannot be replaced or regenerated within our life time.
Examples include - oil, coal, trees that take a long time to grow such as Kauri trees.
Labour is any human resource that is used in the production process. The total number of people who are able to work is the work force.
Capital - this is a man made resource used to produce other goods. In Economics the buying of capital is called investment. Capital can be divided into two types
Productive Capital is the machinery or factory, any capital which is not used up in the productive process.
Circulating Capital this is the semi finished goods that go into the productive process for example in making a car we need: glass, rubber and steel. These are all resources that have been processed and are used up in the production process - they can't be used to create any more goods and services. This is also known as intermediate goods.
A special feature of capital goods is that they depreciate - they lose value over time.
What resources would have been used to make the cake below? Use the resource list next to the picture to complete the table.
Eggs, Flour, bakery owner,  water, butter, mixer, cocoa, oil, water, baker, factory, shop assistant, bowls, spoons, oven, sugar and milk.
Land Labour Productive Capital Circulating Capital Entrepreneurship.
         
         
       
Resources are combined to create a good or service. How the resources are combined will depend upon a number of factors. These include:
  • The cost of the resource.
  • The availability of the resource
Labour intensive production is when relatively more labour than capital is used in the production process. Industries in the service sector such as shops and restaurants use labour intensive production. Countries with cheaper labour also tend to use labour intensive methods of production.
Capital intensive production is when more capital than labour is used in the production process such as car manufacturing. Capital intensive production is often used in the secondary sector where machines are able to carry out many of the tasks. The advantages of machinery is that it can work 24 hours a day, can do dangerous or monotonous tasks faster and more accurately and where labour is relatively expensive it allows for cheaper methods of production.
Primary Sector
The primary sector extracts raw materials from the land.
Any process which involves the extraction or harvesting of raw materials from the natural environment is part of the Primary Sector.
Sheep farming uses land and sheep to produce the goods of wool and sheep meat - these are extracted from the natural environment.
The fishing industry harvests fish from New Zealand waters.
Mining produces coal, oil, natural gas.
Forestry produces timber.
The primary sector produces half of New Zealand's exports.
Which area of production was the largest primary producer for all years?

   
Wool was once a major area of production. Is this still true? Why?

 Which area of production had the greatest change in output?

 

Secondary Sector
Industries in this sector take raw materials from the primary sector and process them into finished or semi-finished goods. Firms in this sector take an input (usually a raw material from the primary sector) process it and then produce an output (either a finished good or a semi-finished good).
 Secondary production includes -
  • Manufacturing
  • Processing
  • Assembling
  • Refining
 

Tertiary Sector
This sector provides services to all sectors and consumers. The tertiary sector includes services such as transport and education. Examples of some of the services a typical business would require are
  • communications (telephone, fax, internet etc)
  • transport (cars, buses, trucks planes etc.)
  • utilities (electricity, gas etc).
  • financial services (banks etc)
  • personal services (doctor etc.)

Interdependence of the Sectors
Each sector depends on the other sectors i.e. they are interdependent.
 
Primary and secondary depend on each other: one to supply raw materials and the other to use them for producing finished goods.
The tertiary sector provides services to both of the other sectors and in turn the tertiary sector relies on the Primary and Secondary sectors for their products and to use their services for income.
 Tertiary provides other services to all firms, e.g. advertising, health, education, transport of goods, banking, power, accounting services.
Case Study
 
peach
 
How are the three sectors interdependent?
   
 
What two sectors are shown in the photo below?
   
farm
 
How does the photograph show interdependence between the primary and tertiary sectors?