As people’s incomes increase, their
demand for food—the main product of
agriculture—reaches its natural limit, and
they begin to demand relatively more
industrial goods. At the same time,
many other areas. Meanwhile, labor productivity
in services does not grow as
fast as it does in agriculture and industry
because most service jobs cannot be
filled by machines. This makes services
more expensive relative to agricultural
and industrial goods, further increasing
the share of services in GDP. The lower
mechanization of services also explains
why employment in the service sector
continues to grow while employment in
agriculture and industry declines because
of technological progress that increases
labor productivity and eliminates jobs.
(Figure 9.2). Eventually the service sector
replaces the industrial sector as the
leading sector of the economy.