Counting Total Production:
- To know he total production within an economy, we take the money value of every goods and services of the three sectors and then they are summed up.
- The value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year. And the sum of production in the three sectors gives what is called the Gross Domestic Product (GDP) of a country.
- In calculating GDP, only value of the final goods is considered, not intermediate goods. Final goods are the goods that have completed its process of production and reach the consumers through market.
- Intermediate goods used up in producing final goods and services. The value of final goods already includes the value of all the intermediate goods that are used in making the final good.
Historical Changes in sectors:
- In the ancient and medieval period of even developed societies of today, the primary sector was the most important sector of their economies. Because societies were fully dependent on natural products achieved through natural resources. They were dependent on the nature.
- But in the advent of modern world and industrial revolution, the secondary sector became the most important sector the economy. Because with growth of technology and industries, many people who were dependent on agriculture now became laborers in factories in urban areas.
- In the last 100 years, we see growth of tertiary sector as most important sector of the economies of mainly developed nations. Most of the working people are also employed in the service sector. This is the general pattern observed in developed countries.