The three sectors of economic activity
Primary industries extract raw materials directly from the natural environment -- farming, fishing, forestry, and mining. Secondary industries take those raw materials and process or manufacture them into finished or semi-finished products -- turning cocoa beans into chocolate, or crude oil into refined petroleum products. Tertiary industries provide services rather than physical goods -- banking, healthcare, transport, and education.
Example 1: Classify each of the following as primary, secondary, or tertiary: cocoa farming, a textile factory, a hospital.
Cocoa farming is primary (extracting a raw material directly from the land). A textile factory is secondary (manufacturing raw cotton into finished cloth). A hospital is tertiary (providing a service, not producing a physical good).
International trade and balance of trade
Countries trade because no country produces everything it needs efficiently -- exporting goods it can produce cheaply or abundantly, and importing goods it lacks or produces less efficiently. The balance of trade is the value of exports minus the value of imports: a positive balance (trade surplus) means a country exports more than it imports; a negative balance (trade deficit) means the opposite.
Example 2: A country exports goods worth $50 billion and imports goods worth $65 billion in a year. Find its balance of trade, and state whether this is a surplus or deficit.
Balance of trade = exports - imports = billion dollars -- a trade deficit of $15 billion, since imports exceed exports.