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Take a few moments to jot down ten things you know off the top of your head about economics. Keep these thoughts in your head as you watch the videos and complete the lesson, and see how your understanding grows over time.

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You will visit brainpop.com and click "I am a student". Enter the class code fish2081. Watch the assigned videos on stocks, supply and demand, and recession movies. Answer the review questions after viewing. Be sure to take notes on each video to use when completing your test.

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Watch the YouTube video on economics and write down what you learned. Once you have watched the video, write down any questions or wonderings you had while watching.

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Read the article on the four sectors. You are only responsible for reading the descriptions of the first four sectors. You will not be expected to know all the material, but it will help to strengthen your understanding. Skim the article and take notes of what you learned.

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What Is a Sector?

A sector is an area of the economy in which businesses share the same or related business activity, product, or service. Sectors represent a large grouping of companies with similar business activities, such as the extraction of natural resources and agriculture.

Dividing an economy into different sectors helps economists analyze the economic activity within those sectors. As a result, sector analysis provides an indication as to whether an economy is expanding or if areas of an economy are experiencing contraction.

In the financial markets, economic sectors are broken down even further into sub-sectors called investment sectors. Investment sectors represent a grouping of companies with similar business activities. Examples of investment sectors include technology, energy, and financial services.

This article explores the main types of economic sectors and the business activity associated with them, and how investment sectors play a role in determining a nation's economic conditions.

Understanding Sectors

Sectors are used by economists to classify economic activity by grouping companies that are engaged in similar business activities. For example, some sectors are engaged in activities that involve the earliest stages of the production cycle, such as extracting raw materials. Other sectors involve the manufacturing of goods using those raw materials. Still, other companies are engaged in service activities.

Developing and emerging economies tend to have only one or two sectors that define most business activities. For example, some nations rely heavily on the extraction and sale of crude oil, which can be turned into gasoline and sold to consumers within developed economies. On the other hand, developed nations tend to have a more diverse representation of all sectors.

Although there is some debate about the true number of sectors that represent business activity in an economy, typically, sectors are broken out into four main categories. However, please bear in mind that there can also be sub-sectors within each of the four major sectors listed below.

Primary Sector

The primary sector involves companies that participate in the extraction and harvesting of natural products from the Earth. Primary sector companies are typically engaged in economic activity that utilizes the Earth's natural resources, which are sold to consumers or commercial businesses.

Companies involved in the processing and packaging of raw materials are also categorized within the primary sector.

Primary sector business activities include the following:

Emerging economies tend to have a higher amount of economic activity and employment concentrated within the primary sector versus more advanced economies. On the other hand, developed nations tend to utilize machinery and technology in their primary sector activities, meaning the primary sector doesn't represent a large portion of the population's employment.

Secondary Sector

The secondary sector consists of processing, manufacturing, and construction companies. The secondary sector produces goods from the natural products within the primary sector. The secondary sector includes the following business activities:

Automobile production

Textile

Chemical engineering

Aerospace space

Shipbuilding

Energy utilities

Tertiary Sector

The tertiary sector is comprised of companies that provide services, such as retailers, entertainment firms, and financial organizations.

The tertiary sector provides services to businesses and consumers by selling the goods that are manufactured by companies in the secondary sector. The types of services provided by the tertiary sector include:

Retail sales

Transportation and distribution

Restaurants

Tourism

Insurance and banking

Healthcare services

Legal services

Quaternary Sector

The quaternary sector includes companies engaged in intellectual activities and pursuits. The quaternary sector typically includes intellectual services such as technological advancement and innovation. Research and development that leads to improvements to processes, such as manufacturing, would fall under this sector.

The companies and firms within the quaternary sector had been traditionally part of the tertiary sector. However, with the growth of the knowledge-based economy and technological advancements, a separate sector was created.

Firms within the quaternary sector use information and technology to innovate and improve processes and services, leading to enhancements in economic development. Firms within the quaternary sector might be engaged in the following business activities:

Research and development

Information technology (IT)

Education

Consulting services

Stock and Investment Sectors

In the financial markets, the economic sectors are broken down into sub-sectors to help investors compare companies with similar business activities. While economic sectors represent a broad representation of the economy, investment sectors further define and categorize companies.

Investment sectors are important because they help measure how well an economy is performing based on the financial performance of the corporations within that sector. The list below does not represent an exhaustive list, but here are some examples of investment sectors:

Technology, such as electronics and software developers

Financial services, such as banks and insurance companies

Real Estate, such as residential and commercial real estate

Industrials, such as manufacturing, machinery, and construction

Energy, which includes the production and supply of energy

Utilities, such as water, electric, and gas companies

Consumer discretionary, which represents non-essential goods

Consumer staples, which represents essential goods such as food and beverage companies

Sectors and the Economy

Investors use sectors to group stocks and other investments into categories that share unique characteristics. Investment sectors can provide insight as to how an economy is performing and which areas of the economy are performing better than others.

Sectors in an Expanding Economy

If there is a large increase in the purchase of raw materials, such as copper or crude oil, it may be an indication that the economy is expanding. In other words, in an expanding economy, businesses and consumers tend to use more raw materials and energy since consumer and business spending is on the rise.

Industrials would also perform well in an expansionary economy since increased economic growth typically leads to an increase in manufacturing and construction. Similarly, real estate, such as commercial real estate and housing, might also experience an increase in sales and development.

If consumer confidence is high, consumers might increase their purchases of non-essential goods, leading to a rise in consumer discretionary spending. As a result, companies within sectors that benefit from an expanding economy would likely experience increased revenue.

Sectors in a Slowing Economy

Conversely, if an economy is performing poorly or there are expectations that economic growth will slow in the coming months, companies that sell consumer staples often experience an increase in revenue. The reason for this correlation between a slowing economy and consumer staples stocks is that consumers will likely continue to purchase essential products, such as paper towels and toilet paper, even in periods of negative or slowing growth.

Also, investment sectors may represent a specific risk profile that may or may not attract investors. For example, in a slowing economy, investment in the utilities sector tends to increase since those stocks are considered safe-haven investments.

Sector Investing

It is common for investment analysts and other investment professionals to specialize in certain sectors. For example, at large research firms, analysts may cover just one sector, such as technology stocks.

Additionally, investment funds often specialize in a particular economic sector, a practice known as sector investing.

For those who want to invest in a particular sector, there are exchange-traded funds (ETFs) called sector ETFs. These funds contain a basket of stocks or securities within a particular industry or sector. For example, the energy sector, particularly the oil and gas industry, is a large industry that attracts specialized investment funds.

Sector vs. Industry

While a sector represents a large segment of an economy that includes many companies, an industry represents a more narrow focus of the companies within a particular sector. Thus, industries are the result of breaking down a sector into more defined and specific groupings. On the other hand, sectors can represent a large grouping of companies that have similar business activities.

Sectors may have companies that don't necessarily compete with each other, while industries tend to represent corporations that are in direct competition.

For example, companies within the oil and gas industry, such as Exxon and Chevron, are competitors. Those same companies also fall under the primary sector since they both engage in the extraction of natural resources. However, Exxon or Chevron would not likely compete with companies involved in agriculture despite being classified within the primary sector.

Sectors of the Economy FAQs

What Are the 4 Main Economic Sectors?

The four main sectors of an economy are listed below:

Primary sector: Represents companies that are involved in extracting natural resources and agriculture.

Secondary sector: Companies involved in manufacturing, construction, and processing producing goods that use the resources obtained from companies within the primary sector.

Tertiary sector: Companies that provide services such as entertainment, financial, and retailers.

Quaternary sector: Involves knowledge-based activities such as information technology, research, and development, as well as consulting services and education.

What Is the Largest Sector of the Economy?

The tertiary sector is the largest sector in the United States since the service industry represents the largest share of economic activity.

What Is Meant by Sector Rotation?

In the financial markets, there are sub-sectors of the economic sectors that contain groupings of companies engaged in similar business activities such as financial services or technology. Sector rotation is the process of shifting investments from one sector of an economy to another.

Are Sector and Industry the Same?

Although the terms sector and industry are often used interchangeably, there are distinct differences between them. A sector represents a large grouping of companies within an economy that are engaged in similar business activities. On the other hand, an industry represents a more specific grouping of companies within a particular sector.

For example, oil and gas companies are categorized within the primary sector since they extract natural resources. Companies that engage in agriculture also fall within the primary sector. However, oil and gas companies are grouped within their own industry, separated from companies within the agriculture industry.

The Bottom Line

Sectors are used to categorize the economic activity of consumers and businesses into groupings based on the type of business activity. Each sector represents a different stage of economic activity as it relates to how closely tied or not that activity is to the extraction of natural resources.

For example, primary sector companies are directly engaged in activities utilizing natural resources, such as mining and agriculture. On the other end of the spectrum, the tertiary and quaternary sectors, representing the services and knowledge-based economy, are engaged in activity that is not directly tied to the Earth's resources.

Investors also use sectors to group different types of companies to help gauge whether those companies are performing well or not. Sectors are important since they help investors and economists understand the various levels of economic activity within an economy.

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What Is an Economic Sector and How Do the 4 Main Types Work?

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A sector is an area of the economy in which businesses share the same or related business activity, product, or service. Sectors represent a large grouping of companies with similar business activities, such as the extraction of natural resources and agriculture. Dividing an economy into different sectors helps economists analyze the economic activity within those sectors.

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You will be responsible for creating an infographic about the economy. Imagine that you are a teacher, and you are trying to teach your students a crash course on economic values and ideas. You will create an engaging, accurate, and neat infographic that quickly explains each main point. You must have at least five topics, and each topic should have a four-sentence minimum explanation. Please see the above photo for reference. You may use any tool such as Word, Canva, or PowerPoint. Post your infographic underneath this post. You should respond to at least two classmates posts. You want to analyze the information, organization, and overall production of their infographic. You should engage in a dialogue between those responding to your post.

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Please use all the notes and resources you have been provided with to complete this test. You may use your notes to complete the test, but you may not use the videos or websites while completing the test.

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Please respond to this post with a single paragraph summarizing your learning. Be sure to briefly cover the information, what you learned, what you struggled with, and what you want to learn more of. It should be between 250-500 words.