Economic Activity

Money makes the world go round! Well, not literally-but much of what we do daily contributes in some way to a local or even national economy. Economic activity is any activity that contributes to that economy. Economies are made up of many different kinds of activities, and as a result, each country's economy develops in different ways. What are the different types of economic activity? Does buying a bag of crisps count...? And what influences countries to build their economies in certain ways? Grab your wallet, and let's find out!

Economic activity definition

An economy is the collective resources of an area and the management of those resources. Your household has its own economy, as does your neighbourhood and city; they are sometimes called a local economy. However, economies are frequently measured on a national level: the collective resources of a country.

In other words, economic activity is anything that contributes to an economy. This can be as simple as selling seeds to grow potatoes to growing potatoes to sell to other countries to produce and sell a bag of crisps! In more developed countries, service and research industries are more prevalent and earn these countries far more money.

The central purpose of economic activity

What is the point of contributing to an economy anyway? Well, at the end of the day, the purpose of economic activity is to meet the needs (and wants) of citizens. This includes producing food so a population can eat, manufacturing, purchasing, or selling vehicles so citizens can access transportation, or ensuring citizens have access to services that can better their quality of life. All of these are influenced by and, in turn, can influence-economic activity.

Fig. 1 - This car factory in Gliwice, Poland, helps meet the demand for transportation while also generating revenue

Economic activity is constantly reviewed and revised. Economic activity analyses must include reviewing the needs of many different groups within a country and the resources required to increase or decrease the production of different economic activities. Corporations adjust their economic activity based on the principle of supply and demand, which is dictated by consumer spending data. Governments may subsidise an activity, service, or industry if they determine that there is a need for expansion to meet the needs of their citizens.

What are some examples of economic activities?

Within an economy, there are four types of economic activity. These are:

• Primary economic activity

• Secondary economic activity

• Tertiary economic activity

• Quaternary economic activity

Primary Economic Activity

Primary economic activity usually involves raw materials (mainly collecting them). This can include logging, mining, and farming. Many smaller and less developed countries rely on these activities and export the materials. The types of materials a country can collect or harvest are primarily tied to physical geography. Certain countries have a higher proportion of raw resources within their borders (such as oil, gold, or diamonds), while other countries do not have the

Physical geography is a limiting factor in primary economic activity. Some countries have higher quantities of highly-valued goods within their borders, such as oil, gold, or diamonds. Other countries have more land available for agriculture or are capable of growing a particular crop more efficiently.

Fig. 2 - Rice fields must be flooded, making rice an impractical crop for countries with low rainfall

Secondary Economic Activity

Secondary economic activity is usually the next step in production following the collection of raw materials. This often results in manufacturing something from those materials, such as paper from wood or pulp, or refining ore into metal. Practising secondary economic activity allows a country to retain control of its own resources longer and develop them into something that can be sold internationally or locally at a higher profit.

Sometimes, countries will specialise their economy only to conduct either primary or secondary economic activities. This is rare. Typically, a country that can produce raw resources will also have at least some infrastructure to manufacture something from them. To develop raw materials, a country must go through some measure of industrialisation. This includes the construction of more factories or industry infrastructure. For example, a country looking to change its mining industry into a secondary economic activity may build forgeries to turn that raw material into more usable supplies to export to other countries for a higher price than selling the material raw.

Tertiary Economic Activity

Tertiary economic activity involves services to other people. From hospitals to taxis, tertiary activities make up the vast majority of developed countries' economic activity, with 80% of the UK’s jobs falling under the tertiary economic sector. Tourism, banking, transport and commerce are more examples of tertiary activities.

Quaternary Economic Activity

Quaternary economic activity is intellectual-based. It involves work that creates, maintains, transports or develops information. This includes research and development companies and many activities involving information such as internet technology or computer engineering. Whilst the other three types of activities involve more physical effort, quaternary economic activity is more theoretical or technological.

Quaternary economic activity has been the least-used activity across the planet for many years, mainly because of how much a country needs to develop to maintain information industries. However, in recent years, the demand for this service has risen drastically, and the sector has expanded dramatically in high-income regions such as western Europe and North America.

Where does each type of economic activity usually happen?

While high-income countries perform tertiary and quaternary activities more than lower-income countries, primary and secondary activities can vary. Across the globe, we see several trends.

Primary economic activity

In less developed countries, primary economic activities are dominant.

Fig. 3 - Raw goods such as barley still remain important components of the Somerset economy

This is not to say that primary economic activities do not exist in more developed countries. Countries like China, the United States, Japan, and Germany remain among the highest exporters of raw goods globally, despite being well-developed. Even in the UK, areas such as Somerset still provide large amounts of grain and other farming essentials.

Secondary economic activity

As previously mentioned, in many countries where primary economic activities are prevalent, secondary activities are also common, so long as the country has become industrialised. These acts of change from primary to secondary activities are often significant steps for countries that result in developing the country's economy as a whole.

Today, China is an excellent example of a country in industrial transition. China has vast raw resources and has the highest output of secondary economic activity globally.

Tertiary economic activity

Highly developed countries often rely on tertiary economic activities for most of their domestic careers. This occurs as the disposable income of the population increases and can support change in the dominant economic industries. This often follows a country's economic growth. As tertiary activities begin to expand, a country performs deindustrialisation and outsources many primary and secondary activities to other countries. In developing countries, tertiary activities are less common because the general population has less disposable income to support that transition.

Quaternary economic activity

Only the most developed countries have large amounts of quaternary activity, with smaller, less developed countries having a much smaller amount due to the lack of resources available.

Often, world cities, metacities or Megacities are responsible for most quaternary activities because their transnational reach and high level of both population and income allow these industries to be managed effectively.

Less developed countries lack the high level of resources that quaternary industries require. Things such as labour and capital can prevent cities in these countries from efficiently maintaining this activity and not having as clear of a flow of information, which directly inhibits the ability of the activity to succeed.

Check out our explanations on World Cities, Meta cities, or Megacities!