Welcome to Economic Activity and Energy!

Hello Geographers! This chapter is incredibly important because it explains how the world makes money and how we power our lives. Economic activity means all the ways people work to produce goods and services. Understanding this helps us figure out why some countries are rich, some are poor, and how we can achieve a sustainable future.
Don't worry if some terms seem new; we will break them down using simple examples!

Section 1: The Four Sectors of Economic Activity

Every job in the world can be sorted into one of four main categories, called sectors. Think of these as steps in turning raw materials into finished products or services.

1. Primary Sector: Getting the Goods

The Primary Sector involves extracting or harvesting raw materials directly from the Earth.

Key Concept: This is the base layer – everything else depends on it.
Examples:

  • Farming (crops and livestock)
  • Mining (coal, iron ore, gold)
  • Quarrying (stone, sand)
  • Fishing and Forestry

Did you know? In less economically developed countries (LEDCs), a very high percentage of people work in the Primary Sector.

2. Secondary Sector: Making Things

The Secondary Sector (also called Manufacturing) takes raw materials from the Primary Sector and turns them into finished products or components.

Analogy: If a farmer grows wheat (Primary), the Secondary sector turns it into flour and then bread.
Examples:

  • Car manufacturing
  • Building homes and factories (Construction)
  • Refining oil
  • Textile (clothing) factories

3. Tertiary Sector: The Service Industry

The Tertiary Sector provides services rather than physical goods. These jobs support the other sectors and provide services directly to consumers.

Key Concept: As countries develop, the Tertiary sector usually grows the fastest.
Examples:

  • Retail (shops and supermarkets)
  • Healthcare (doctors, nurses)
  • Education (teachers)
  • Transport (bus drivers, pilots)

4. Quaternary Sector: Knowledge and Ideas

The Quaternary Sector deals with information, research, and high-level knowledge creation.

Key Concept: This sector is highly skilled, often requires advanced technology, and generates high income.
Examples:

  • Scientific research and development (R&D)
  • IT services and software design
  • Consultancy (offering expert advice)
  • High-level financial planning

Quick Review: Sector Summary

Primary = Pulling things out of the ground.
Secondary = Shaping things in a factory.
Tertiary = Taking care of people (services).
Quaternary = Questions and Computing (research and knowledge).

Key Takeaway: The balance of these sectors shows how developed a country is. Richer countries rely heavily on the Tertiary and Quaternary sectors.

Section 2: Why Things Are Built Where They Are (Location Factors)

The decision of where to locate a business is crucial. We must look at two types of location factors: those for traditional Manufacturing Industries and those for modern High-Tech Industries.

A. Location Factors for Traditional Manufacturing (e.g., Car Factories, Steel Works)

These businesses often involve moving large, heavy, or bulky materials, so they need specific locations.

  1. Raw Materials: If the material needed is heavy (e.g., iron ore for steel), factories must locate close to the source to save transport costs.
  2. Labour Supply: Access to a large, often manual, workforce at a reasonable wage.
  3. Transport Links: Good access to roads, railways, ports, or canals to move heavy finished products and raw materials efficiently.
  4. Market Access: Being close to the area where the final product will be sold can reduce delivery time and cost.
  5. Land: Factories need large, flat plots of land, often found on the outskirts of cities.

Analogy: Imagine baking a heavy cake. You want your kitchen near the store (raw materials) and near where you sell it (market) to avoid dropping it!

B. Location Factors for High-Tech Industries (Quaternary and Advanced Secondary)

These industries, like software design or microchip production, are often footloose—meaning they are not tied down by raw material locations. They rely on brain power and clean environments.

  1. Skilled Labour: Proximity to universities and research centres to hire highly qualified engineers and researchers.
  2. Communications: Excellent broadband and global communication links (easy access to international airports).
  3. Environment: A clean, attractive setting (often called a 'greenfield site') that appeals to highly-paid staff and helps attract investment.
  4. Government Support: Tax breaks or grants offered by the government (often in designated Science Parks or Technology Hubs).
  5. Venture Capital: Access to banks and investors willing to fund new, risky technology ideas.

Memory Aid for High-Tech Location: B.A.S.K.

Brainpower (Skilled Labour)
Access (Communications/Airports)
Science Parks/Support
Knowledge (R&D)

Key Takeaway: Traditional industries locate near raw materials and transport; High-Tech industries locate near skilled people and strong communication links.

Section 3: The Formal vs. Informal Economy

Not all economic activity is counted by the government. Economists divide jobs into two main categories.

A. The Formal Economy

The Formal Economy is the registered, regulated, and taxed sector of work. These jobs are official and protected by law.

Characteristics:

  • Workers pay income tax and national insurance.
  • Jobs are monitored by the government (included in GDP statistics).
  • Workers have legal rights (minimum wage, sick pay, pensions).
  • Businesses must follow strict health, safety, and environmental rules.

B. The Informal Economy

The Informal Economy (or shadow economy) consists of jobs that are unregulated, untaxed, and often cash-in-hand. This sector is huge, particularly in large cities in LEDCs.

Characteristics:

  • Work is often unskilled, temporary, or part-time.
  • No taxes are paid, meaning no government revenue is generated.
  • Workers lack legal rights or protection (no sick pay, poor safety).
  • Often involves street vending, illegal trading, domestic service, or recycling scavengers.

Why Does the Informal Economy Exist (Especially in LEDCs)?

1. Rapid Rural-Urban Migration: Many people move to cities hoping for jobs, but the formal sector cannot employ everyone.
2. Lack of Education/Skills: Many migrants lack the skills needed for formal sector jobs.
3. Ease of Entry: It is easy to set up an informal business (e.g., selling fruit on the street) without formal paperwork.
4. Poverty: People need immediate income to survive.

Advantages and Disadvantages of the Informal Economy

| Feature | Advantages | Disadvantages |

|---|---|---| | For Workers | Provides immediate income for survival; flexibility in hours. | No job security; often low wages; long hours; dangerous working conditions; exploitation. | | For the City/Government | Helps the poor survive (less dependency on state); provides cheap goods/services. | No tax revenue collected; often creates congestion, litter, and slums; difficult to regulate or improve city infrastructure. |

Key Takeaway: While the informal economy provides essential survival income, it hinders a country's development by limiting tax revenue and worker protection.

Section 4: Global Energy Demand and Supply

Energy is the foundation of economic development. Without reliable energy, countries cannot industrialise, run hospitals, or power homes.

A. The Rise in Global Energy Demand

Demand for energy has skyrocketed globally, primarily due to three reasons:

  1. Population Growth: Simply put, more people means more energy needed for cooking, heating, and transport.
  2. Economic Development and Industrialisation: Newly Emerging Economies (NEEs) like China and India are rapidly industrialising. Factories use massive amounts of energy.
  3. Increased Wealth and Quality of Life: As people get richer (especially in LEDCs and NEEs), they start buying energy-consuming goods like cars, air conditioning, and appliances.

Did you know? The per capita (per person) energy consumption in the USA is vastly higher than in most African nations, showing the link between development and energy use.

B. Energy Supply: Renewable vs. Non-Renewable

We classify energy resources based on whether they can be replaced naturally within a short human lifetime.

Non-Renewable Energy (Finite Resources)

These resources cannot be replaced quickly once used and are typically sources of pollution.

  • Fossil Fuels: Coal, Oil, and Natural Gas.
  • Nuclear Power: Uses uranium, which is finite, but produces energy with minimal direct CO2 emissions (though waste disposal is a major issue).
Renewable Energy (Sustainable Resources)

These resources can be constantly renewed and are often less polluting.

  • Solar: Energy from the sun.
  • Wind: Energy from turbines capturing air movement.
  • Hydroelectric Power (HEP): Energy from flowing water, usually in dams.
  • Geothermal: Heat energy extracted from the Earth’s core (often used in areas with volcanic activity).
  • Biomass: Energy derived from organic matter (e.g., wood, animal waste).

Key Takeaway: Global energy demand is rising, driven by rising population and wealth. The challenge is shifting reliance from polluting non-renewable sources to sustainable renewable sources.

Section 5: Economic and Environmental Impacts of Energy Production

While energy production is essential, it comes with significant costs and benefits.

A. Environmental Impacts of Non-Renewable Energy

The continued reliance on fossil fuels creates major environmental problems:

  1. Climate Change: Burning oil, gas, and coal releases enormous quantities of Greenhouse Gases (GHGs), primarily carbon dioxide (CO2). This strengthens the greenhouse effect, leading to global warming and climate change.
  2. Air Pollution and Acid Rain: Burning coal and oil releases sulphur dioxide and nitrogen oxides. These gases cause acid rain, which damages forests, buildings, and kills aquatic life in lakes.
  3. Visual and Noise Pollution: Large mines, oil rigs, and power stations can destroy natural habitats and are noisy.
  4. Oil Spills: Transporting oil via tankers risks catastrophic spills, devastating marine ecosystems and coastal areas (e.g., the Exxon Valdez disaster).

B. Impacts of Renewable Energy

Renewables are cleaner, but they are not impact-free:

  • HEP Dams: They flood huge areas of land, displacing people and destroying ecosystems. They also change the river flow, affecting downstream agriculture.
  • Wind Farms: Although clean to run, they can be visual pollution in scenic areas and pose a danger to migrating birds.
  • Geothermal: Can release low levels of greenhouse gases already trapped underground.

Encouragement: Remember, IGCSE questions often ask you to weigh up the costs and benefits. Always think critically about ALL energy sources, not just the non-renewables!

C. Economic Security and Energy Supply

Energy supply is also a major economic and political issue called Energy Security—a country's ability to reliably access affordable energy.

  • Dependence on Imports: Countries with little domestic oil or gas are reliant on imports. If political conflict occurs in the supplying country (e.g., the Middle East), prices can skyrocket, damaging the importing nation's economy.
  • High Cost of Renewables: Although renewable technology is getting cheaper, the initial cost of building major infrastructure (like solar farms or wind turbines) can be huge, making it difficult for poorer countries to switch from cheap coal.
  • Job Creation: Switching to renewables creates new 'green jobs' in manufacturing and maintenance, boosting the economy.

Summary of the Energy Challenge

The global challenge is to meet rising energy demand (due to population and development) while minimizing the severe environmental damage caused by burning fossil fuels and ensuring all countries have a secure supply.

Review and Exam Focus

For your exam, make sure you can:

  1. Describe and provide examples for all four economic sectors (Primary, Secondary, Tertiary, Quaternary).
  2. Explain the differences in location factors between old manufacturing and new high-tech industries.
  3. Distinguish clearly between the formal and informal economy (focus on characteristics and impacts in LEDCs).
  4. Discuss the causes of rising global energy demand.
  5. Compare and contrast the environmental and economic impacts of renewable and non-renewable energy sources.