The primary sector refers to business activity involved with the extraction of natural resources. For example, metal ores and coal have to be mined, oil and natural gas have to be drilled from the ground, rubber needs to be extracted from trees, foodstuffs need to be farmed, livestock need to be managed by farmers, and fish need to be trawled. Hence, primary sector production is also known as extractive production.

Examples of primary sector output include:

Primary sector output is the predominant sector in less economically developed countries (LEDCs) or low-income economies. It accounts for the majority of gross domestic product (GDP) and employment in these economies (see Table 1). Examples of such goods produced in the primary sector include oil, gas, water, fish, fruits and vegetables, and wood.

Table 1 - Composition of gross domestic product (GDP) by production sector, 2017

Source: adapted from CIA Factbook

The added value of primary sector output is relatively low. For example, raw materials such used to manufacture a smartphone costs far less than the final product sold to consumers. Hence, workers in the primary sector are typically paid less than those in the secondary or tertiary sector.

The secondary sector refers to business activity involved with the manufacturing or construction of finished products. It encompasses transforming primary sector output into finished goods, ready for sale or use by the consumer. For instance, plastics need to be made from using oil. It also includes businesses that are involved in transforming other secondary sector output into finished goods, such as assembling the component parts of motor vehicles, laptops, or smartphones.

Examples of secondary sector production include:

Secondary sector output is the predominant sector in economically developing countries (or middle-income economies). It accounts for the majority of gross domestic product (GDP) and employment in these countries or states. However, in many high-income countries, the mass use of high-tech mechanisation and automation has also caused unemployment in some industries. Many economists argue that the secondary sector is the "engine of growth", signifying the importance of manufacturing and construction for a country's economic growth (see infographic below).

Source: Statista

The tertiary sector refers business activity that involves providing services to customers, i.e. consumers and business clients. Tertiary sector output is the predominant sector in economically developed countries (or high-income economies). The tertiary sector of the economy accounts for the majority of gross domestic product (GDP) and employment in these countries.

Examples of tertiary sector business activities include:

The added value of tertiary sector output is very high. For example, households are generally willing to pay the high prices charged by a plumber to fix a leaking water pipe. This is because the plumber provides high added value services to the consumer by fixing the leak, something that the consumer has no expertise or time to complete.

In general, as an economy grows and develops, the significant of the primary sector diminishes (in terms of output and employment), whereas the importance of the tertiary sector becomes more prominent (see Table 2).

Table 2 -  Proportions of economic sectors in the gross domestic product (GDP) in selected countries (2020)

Source: Statista

Watch this 4-minute video clip that demonstrates the potato growing process, from planting to harvesting (in the primary sector), processing 24/7 at the potato factory (in the secondary sector), and how the potatoes end up on the supermarket shelf (in the tertiary sector).

The quaternary sector refers to business activity involving the creation or sharing of knowledge and information. It involves using computer and digital information technologies.

Examples of production activities in the quaternary sector include:

• Tertiary and higher education

• Information and communications technology (ICT)

• Management consultancy

• Management information systems (MIS)

• Online educational providers, such as InThinking, Pamoja Education, and Level7Education, that rely on digital communications technologies

• Research and development (R&D)

• Software and ‘app’ developers

The added value is extremely high in the quaternary sector. For example, each year, many students (or their parents) are willing to pay very high tuition fees charged by universities.

The quaternary sector is a relatively new categorization, due to the significant shift in advanced technologies, such as wireless and mobile telecommunications technologies. It also requires a highly educated population, yet the vast majority of the world’s population do not progress to further or higher education.