Business structure - 105

Question 1

Explain the difference between the private and public sector

Answer 1

Public sector - owned and run by the government. Public services. They are run to provide a service, not make a profit
Private sector - owned and run by shareholders and individuals and are run to make a profit

Question 2

Explain the aims of private sector businesses including survival ,growth and profit

Answer 2

-survival
-growth
-profit (main measure of success in the private sector)
other aims:
- increase shareholder value (dividend and share price increase)
- ethics
-increase market share

Question 3

Explain the aim of the public sector and its role in providing goods and services

Answer 3

main aim - provide service that no other business would not provide e.g. streetlight or provide them in a way that everyone would be able to afford them
other aims - employment
-public goods (non-rivalry. Non-excludable: this means that individuals cannot be prevented from enjoying the benefits of the provision of public goods or services. e.g streetlights)
-Merit goods (goods that could be provided by the free market but policy makers recognise that they would be under-consumed, would not be provided for all if left to the private businesses, these goods have a positive effect on the whole society)

Question 4

Evaluate the roles of the public and private sectors in the provision of goods and services

Answer 4

public sector:
(+)provides goods and services to those who cant afford them
(+)provides employment - spend incomes on private sector goods , helping them make a profit
(-) monopoly power which could lead to them not improving the goods and services. Not for profit (lack of incentive?)
(-)paid for through taxation

Private sector:
(+)Profit motive and competition means they have to continually develop new and better products or they will not survive which is good for consumers
(-)not affordable to all consumers
(-)some goods would not be offered at all (e.g.streetlights)

Question 5

Explain the different structures of private sector businesses

Answer 5

> sole trader - 1 owner and unlimited liability >partnership - 2-20 owners and unlimited liability
private limited company (Ltd) - private shareholders and limited liability
Public limited company (PLC) public shareholders and limited liability

Question 6

Define Not-for-profit organisations

Answer 6

They are not out to maximise profits. Instead their focus is on social or ethical objectives.
-social enterprises: trade to help solve problems
-charities:any profit is a surplus and needs to be given to their cause
-co-operatives: set up in the 19th century as a social movement by working people, they were designed to prevent profiteering and exploitation
-societies