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Study the figure above.
a. List some examples of primary, secondary, tertiary, and quarternary activities.
PRIMARY ACTIVITIES are those that directly remove resources from the earth. Generally they include AGRICULTURE, MINING, fishing, and lumbering. Primary activities, which extract raw materials directly from the earth, include agriculture, forestry, fishing, trapping, and mining. Some raw materials are used by humans in their raw form, such as bananas, eggs, and coal. But many others are not, such as wheat, cattle, and unrefined oil. Copper ore, which can be less than 1 percent copper and 99 percent other materials, requires extensive processing before it can be used by people.SECONDARY ACTIVITIES involve converting resources into finished products. These are the MANUFACTURING activities.Secondary activities are manufacturing operations that transform raw materials into more usable forms. They add value by making wheat into flour, copper ore into wire, and silicon into computer chips, and by assembling sophisticated components into computers, airplanes, and cars.
TERTIARY ACTIVITIES comprise the SERVICE sector of the economy. The tertiary activities include retailing, transportation, education, banking, etc. Tertiary activities take the goods that are produced and manufactured by the primary and secondary sectors and either sells them to consumers or uses them to perform services for consumers. Services, quite simply, are tasks that you pay others to do for you. The tertiary sector thus includes wholesale and retail trade, restaurants, finance, transportation and communications, medicine, law, education, tourism, and entertainment. The service sector involves many occupations that do not require a high level of education or training (which are referred to as “low-skill” jobs), such as fast-food workers, janitors, cashiers, and bus drivers. Yet, the most dynamic part of today’s service sector includes highly skilled, information-based services called quaternary activities, concerned with research and development (R&D), management and administration, and processing and dissemination of information.
QUATERNARY ACTIVITIES: The distinction between tertiary and quaternary activities is somewhat fuzzy. Technically, quaternary activities can be considered a subset of the tertiary sector in that they are services that people do for other people using equipment (e.g., computers, telephones, slide projectors, etc.) manufactured by the secondary sector. But, in practice, the quaternary or “knowledge sector” is fundamentally different from other services. Your local bank clerk is a tertiary worker, whereas an investment banker brokering a merger between two large companies is a quaternary worker.
b. Draw on the graph WHERE you think the US economy would be.
c. What percent of the work force in the US economy is engaged in primary activities?
about 2%d. Over the last 100 years the US economy has lost many farm jobs and a smaller percentage of the work force work in factories. Some people worry about these changes, while others say that it is part of economic development. Explain
As can be seen on the graph above as a country developes economically the relative size of the primary sectore declines. With modernization and mechanization of agriculture labor productivity increases and fewer farmers are needed. Many would view this as "progress" while other try to "save the family farm".
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(1)
(2)
(3)
Which of the sets of graph above[ [(1), (2), or (3)] represent:
a. raw-material orientation (i.e. the lowest cost location for the factory as at the source of the raw material) #1b. market orientation (i.e. the lowest cost location for the factory is at the market where the customers are) #2
c. break-of-bulk orientation ( the lowest cost orientation is where large shipments of raw materials is divided into smaller lots) #3
d. paper manufacturing (approximately 3 tons of wood are used to make 1 ton of paper) #1
e. an industry where the raw materials are ubiquitous #2
f. old steel industry where large amounts of coal were need to produce steel #3
g. soft drink bottling plant where large amounts of water are added to syrup and then bottled #2
h. copper concentrating plant used to remove copper from the ore #1
i. glassmaking where the main raw material is sand which is fond almost everywhere #2
j. mattresses #2
k. petrochemical refining #3
l. explanation of why more breweries in the 1800's were located in the northern states rather than the southern states #1
m. explanation of the location early commercially produced and easily-spoiled ales in the US #2
n. breweries where water, which could be considered a ubiquitous raw material, is the primary ingredient by weight and volume #2
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There are two types of agglomeration economies:
- localization economies, and
- urbanization economies
a. What are agglomeration economies and how do they affect the location of factories?
"Agglomeration economies are cost savings (i.e., “economies”) obtained by clustering (i.e., “agglomeration”). By locating within an agglomeration, firms can minimize their transaction costs, which are the additional costs of purchasing or selling a good or service beyond its actual price and transportation costs. Transaction costs include the costs of identifying buyers and sellers, finding and attracting skilled workers and investors, working out technological specifications and delivery schedules with parts suppliers and customers, learning new technologies and acquiring other information, and dealing with delays and shortages. Transaction costs are sometimes referred to as the hidden costs of doing business because they are very difficult to measure. However, just because these costs don’t appear as a separate item in a company’s balance sheet doesn’t mean that they aren’t very real costs that can make or break a company. These costs are are highest in complex and rapidly changing industries." (p. 138)b. Differentiate between localization economies and urbanization economies
We can distinguish between two kinds of agglomeration, depending on whether the externalities extend mainly to firms within a single industry (known as localization effects) or to all firms in the area (urbanization effects).c. Do the following represent (1) localization economies, or (2) urbanization economies?
1. " . . . Most large cities offer a wide array of producer services (also known as business services), which include engineering firms, advertising agencies, printing shops, accounting firms, corporate law firms, temporary employment agencies, freelance editors, corporate trainers, office equipment repair, payroll processing companies, freight forwarders, and the like." (p. 141) URBANIZATION ECONOMIES2. " . . .tires in Akron, Ohio; glass in West Virginia; chemicals in Texas; lace in Brussels, Belgium; pharmaceuticals in Philadelphia; entertainment in Hollywood; finance in New York City; fashion in Milan; and aircraft in Seattle." (pp. 138-9) LOCALIOZTION ECONOIMIES
3. " Several mechanisms act to reinforce an initial industrial cluster and create a snowballing effect that attracts more activity to the cluster. First, agglomerations allow specialized support networks of suppliers and services to emerge . . ." (p. 139) LOCALIZATION ECONOMIES
4. " . . . cost-saving externalities derive from an increase in the size of the place and accrue to all firms." (p. 141) URBANIZATION ECONOMIES
5. " Economic clustering of secondary, tertiary, and quaternary companies in metropolitan areas like Toronto, New York, Chicago, and Los Angeles is partly a result of __URBANIZATION___ economies that minimize the transaction costs among myriad urban businesses." (p. 141)
6. " Silicon Valley is a preeminent example of all three mechanisms driving __LOCALIZATION ECONOMIES___: specialized networks of suppliers and support businesses (inter-industry linkages), specialized labor market, and technological spillover." (p. 140)
7. " A second type of __LOCALIZATION ECONOMY____ economy is the presence of skilled labor." (p. 139)
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What are the three main factors that cause an increase in labor productivity in the industrial economy? (p. 148)(1) mechanization,
(2) economies of scale, and
(3) specialization
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Define and compare the industrial economy with the postindustrial economy. (pp. 148-151)See pages 148-151.
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Compare the shares of employment between Illinois and the entire United States. In which two economic categories does Illinois greatly exceed the national average in ratio terms? For the two economic categories with the highest ratios, discuss why you think Illinois specializes in those activities.Producer Services ratio: 1.36
Other Manufacuring ratio: 1.23Producer services (also known as business services) are services provided by businesses to other businesses. These include "engineering firms, advertising agencies, printing shops, accounting firms, corporate law firms, temporary employment agencies, freelance editors, corporate trainers, office equipment repair, payroll processing companies, freight forwarders, and the like." "Most large cities offer a wide array of producer services (also known as business services), Economic clustering of secondary, tertiary, and quaternary companies in metropolitan areas like Toronto, New York, Chicago, and Los Angeles is partly a result of urbanization economies that minimize the transaction costs among myriad urban businesses." So producer services are tertiary and quaternary activities that serve secondary (manufacturing) industries. Illinois employment in manufacturing is also above the national average.
Urbanization economies are "a second type of agglomeration economy (the first type are locational economies) [where] cost-saving externalities derive from an increase in the size of the place and accrue to all firms. This is partly because bigger cities provide larger markets, but also because bigger cities provide many goods and services that a firm located in a smaller city or rural area might otherwise have to provide in-house, such as nearby airports, water and fire services, emergency health care, and job training.
Many students (and me as well) underestimated Illinois employment in manufacturing. About 14 % of Illinois' labort force is employed in manufacturing (above the national average of 11%). Why?
Access to raw materials (coal and iron ore) and easy transportation on the Great Lakes have helped Illinois become part of the old US manufacturing belt. Also, Chicago is a break-of-bulk point (the stage of transportation when a bulk shipment (like iron ore) is broken into smaller lots and/or different modes of transportation.).
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Look at the maps below. Some of the maps show a strong regional concentration of particular industries, with the high-percentage states clustered together, while maps of other categories do not.a. Which economic categories are strongly regionalized, and in which part of the United States and Canada? Why do you think these economic categories might be concentrated in those particular regions?
Agriculture, Forestry, and Fishing in the Great Plains and Northern Rockies in both the United States and Canada. These are areas with few large cities and low population density, so the farmers and loggers that do live here make up a larger share of the total workforce.
and
All Other Manufacturing has two regional clusters. The main block of leading states is the industrial Midwest—Ohio, Indiana, Michigan, Wisconsin, Ontario, and Quebec. This region has specialized in the manufacture of steel, machines, automobiles, household appliances, and other durable products (with a normal life expectancy of more than three years) since the end of the nineteenth century. It was located near the westward-shifting population center of the U.S. and Canada; it was near to the most important industrial raw materials for steel making (coal in Appalachia and the Illinois/Indiana basin, and iron ore in the Lake Superior area); and it benefited from the transportation of cheap bulk goods on the Great Lakes. Detroit became the early center for auto manufacturing as a result of early specialization in internal combustion engines for maritime transportation. Henry Fort put Detroit into its leading position, and agglomeration economies of subcontractors and specialized labor ensured that the auto industry remains entrenched in the industrial Midwest.
Arkansas, Mississippi, Alabama, Tennessee, and the Carolinas comprise a second distinct region of high manufacturing employment. These states specialize in lumber and wood products and furniture making in addition to more traditional heavy industries such as steel making and metal fabricating, industrial machinery, refrigeration equipment, electrical equipment including motors, generators, and household appliances. More recently, Japanese and European auto companies have begun assembling motor vehicles in this region, where the labor is less expensive than in the traditional Midwest auto region. Honda was the first foreign auto company to open a plant in the South, and most other Japanese automakers followed suit so as not to allow Honda a competitive advantage. More recently, BMW opened a plant in South Carolina. Durable goods manufacturing actually began in the U.S. in New England in the 1700s. Traditionally, New England specialized in textiles and shipbuilding and in building machinery for these and other industries. For the most part, textiles and shipbuilding have long since left for cheaper labor and locations in this southern cluster of states, and overseas.
b. Which economic categories thrive in states and provinces with large cities, and why?
Economic categories which appear to thrive in states and provinces with large metropolitan areas include:
Finance, Insurance, and Real Estate (FIRE) is concentrated in the major metropolitan centers that have control information and finance for their regions of North America: New York/New Jersey, Boston, Hartford, Washington DC./Maryland/Virginia, Philadelphia, Cleveland, Chicago, Miami, Dallas/Houston, Minneapolis, Denver, Phoenix, Seattle, Omaha, and Los Angeles and San Francisco. These are the headquarters of the major banks, stock and commodity exchanges, brokerage houses, and financial institutions. While Boston is no longer a top-5 city in terms of population, it has been a leading financial and educational center since the 1700s, and it is still home to many banks plus Fidelity, MFS, and other investment banking/mutual fund companies. Connecticut gets spillover from New York, plus Hartford has long been the insurance capital of the country. Washington DC and Maryland benefit from the proximity to the seat of government. Chicago is the home of the commodity exchange. Miami performs many functions for Latin America and the Carribean, while Phoenix does the same for the Southwest, and Denver for the Rockies, Minneapolis for the Upper Great Plains, Seattle for the Pacific Northwest, and Toronto for Canada. Nevada, Utah, and South Dakota are the most surprising states on this list. Nebraska is actually not a surprise. Omaha, Nebraska is the home of the insurance giant, Mutual of Omaha. Omaha is also an attractive location for a variety of back-office, standardized financial processing work.
c. Which economic categories are spread fairly evenly across the nation, with little difference between the highest and lowest states, and why?
The economic category most evenly spread out across the nation is retail trade. Retail trade occurs wherever people shop, which is everywhere!
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a. Compare basic industries with nonbasic industries.
States especially are interested in attracting new basic industries, which are those that sell outside of the local region and thus bring new money into the region. In contrast, nonbasic industries produce mainly for the local market, supplying the needs of the region’s inhabitants. According to the economic base model, exports from basic industries are the engine of regional development (Figure 6.7). They not only bring in money from outside to employ workers in the basic industries, but in addition, for each job created in the basic sector, several more are created in the nonbasic sector. This relationship is called the regional multiplier. The multiplier is the total number of jobs created in the basic and nonbasic sectors for each new basic job in a region.b. (1) Region A has a total labor force of 2,100. Of these jobs, 700 are in the basic sector and 1300 are nonbasic. What is the size of the regional multiplier? (2) AT&T plans to build a new parts factory employing 200 new people in basic jobs. How many total new jobs will be created in Region A?
(1) k = Et/Eb = 2100/700 = 3(2) 200 new basic jobs would create 200*3 = 600 total new jobs.
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