business ownership

Question 1

Private sector

Answer 1

Private sector comprises businesses owned and controlled by individuals or groups of individuals

Question 2

public sector

Answer 2

Public sector comprises organisations accountable to and controlled by central or local government (the state)

Question 3

Mixed economy

Answer 3

Mixed economy – economic resources are owned and controlled by both public and private sectors

Question 4

free market economy

Answer 4

Free market economy – economic resources are owned largely by the private sector with little state intervention

Question 5

Command economy

Answer 5

Command economy – economic resources are owned and controlled by the state

Question 6

why do government own business

Answer 6

To provide essential services
To control strategic industries/resources e.g., energy, telecommunications, public transport
Because of public goods (goods that cannot be charged for, and which private business would not profit from

Question 7

Sole trader

Answer 7

Sole traders: Definition: this is a business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profits

Question 8

sole trader 4 advantages

Answer 8

Advantages: 
Easy to set up – no difficult legal formalities
Keep all of the profits
Has full control over the business
Can choose own working hours

Question 9

Sole trader 3 disadvantages

Answer 9

Disadvantages:
Unlimited liability: This means that the sole trader is personally responsible for paying the debts of the business.
They may lose their personal assets to pay business debts.

Lack of continuity: If the sole trader dies then the business “dies” with them.

Difficulty raising finance: It can be difficult for sole traders to raise finance/capital
Banks are less likely to give them finance – they are seen as riskier investment
Only one person’s personal finance to use

Question 10

partnership definition

Answer 10

Definition: a business formed by 2 or more people to carry on a business together with shared capital investment and, usually, shared responsibilities

Question 11

Partnership 6 advantages

Answer 11

• Easier to raise finance
• Shared decision making – may be easier at times
• Increased expertise
• Shared risk
• Shared losses
• Easy to set up – Deed of Partnership only

Question 12

partnership 4 disadvantages

Answer 12

• Shared profits
• Decision making may be more difficult
• Unlimited liability
• Still difficult to raise additional finance – banks still wary
No continuity if partners die