II.

Industry Classifications

An industry is usually classified either by a major input (good or service used to produce the final product) or by the industry’s final product. When a final product is used by another industry, it is called a producer good. Steel, which is used by other industries to produce automobiles, airplanes, construction materials, and numerous other products, is an example of a producer good. Final products, such as automobiles, which are purchased and used by individuals, are called consumer goods.

Industries also may be classified as primary, secondary, or tertiary industries. Primary industries use raw natural resources as major inputs. Agriculture, commercial fishing, mining, and the forest industry are primary industries. They use farmland, oceans, mineral deposits, and forests, respectively, as their major inputs.

Secondary industries use producer goods to assemble their products. For example, the construction industry produces houses, other buildings, and roads. Its inputs include lumber manufactured by the forest industry. The largest group of secondary industries is the manufacturing industries. Manufacturing industries produce a vast array of consumer and producer goods, such as processed food, clothing, heavy machinery, automobiles, electronics, and household appliances.

Final products manufactured by secondary industries are classified as durable goods and nondurable goods. Durable goods are products that are used repeatedly over long periods of time, such as automobiles and washing machines. Nondurable goods are products that are used for a short period of time, such as disposable contact lenses, clothing, food, toothpaste, soap, and other items.

Tertiary industries are those that provide services. For example, retail stores, universities, hotels, banks, television stations, hospitals, and travel agencies are all tertiary industries. Also classified as tertiary industries are all forms of government activity, ranging from local trash disposal to the armed forces.