Comparison between sectors

COMPARISON BETWEEN SECTORS

• Now, the question arises, how do we count the various goods and services and know total production in each sector?
• For this, we find the value of goods and services rather than the quantity. For example, if 10,000 kg of wheat is sold at Rs.8, then the value of wheat is Rs.80, 000. In this way, the value of goods and services in the three-sector is calculated and then added up.
• However, some goods and services are not included in this. They are known as intermediate goods. For example, a farmer sells wheat to a flour mill at Rs.8 per kg. The mill grinds the wheat and sells the flour to a biscuit company for Rs.10 per kg. The biscuit company uses flour and things such as sugar and oil to make four packets of biscuits. It sells biscuits in the market to consumers for Rs 60 (Rs 15 per packet). Biscuits are the final goods, i.e., goods that reach the consumers. Here, wheat and wheat flour are examples of intermediate goods and therefore will be excluded to avoid the problem of double counting.

• Thus, intermediate goods can be defined as goods that help in producing final goods and services. The value of final goods and services includes the cost of intermediate goods. In the above example, the price of biscuits is inclusive of the price of wheat.
• The value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year. Moreover, the sum of production in the three sectors gives what is called the Gross Domestic Product (GDP) of a country. It is the value of all final goods and services produced within a country during a particular year. GDP shows how big the economy is.
• A central government ministry undertakes GDP.

Changes in the sector with TIME

• The primary sector was the most important sector of economic activity. However, with the change in farming techniques, the agriculture sector began to prosper and produced much more food than before. Many people could now take up other activities. There was an increase in the number of craft persons and traders. Buying and selling activities increased many times. Besides, there were also transporters, administrators, army etc. However, a major section of the society was employed in the primary sector.

• Over the years, manufacturing was introduced and factories started coming up. People shifted from farming to manufacturing. The secondary sector thus gathered importance in total production and employment.
• However, another shift was observed. People started shifting from secondary to tertiary sector, which became the most important in terms of total production.