Business structure - public and private sector

Question 1

what is the difference between a public and private sectors?

Answer 1

private sector - owned by private individuals/shareholders including sole traders partnerships, co-operatives, limited companies. can be for profit and not for profit organisations

public sector - owned by local/national government, public services such as NHS

Question 2

what are the 5 aims of a private sector?

Answer 2

make a profit - profit maximisation means the firm is concerned with maximising brand value and minimising costs

to increase shareholder value - measured by dividends paid and share price, main objective for directors of limited companies, senior managers will have bonus schemes

survival - majority of businesses fail in first 2 years, at the start gaining customers and establishing a good reputation are important , larger business may have these aims when there is a recession and market is competitive

growth/ gaining market share - can be achieved through increasing market share and expanding the sale of operations, increasing market share means gaining more customers within the market, firms may need to spend to gain this which may reduce profits for a short - term but be beneficial in the long - term

ethics - some may minimise the impact of their activity on the environment or ensure their suppliers get a good deal, these may increase costs and reduce profits

Question 3

what are some aims of the public sector? give 3

Answer 3

maintain and improve the standard of living.
allow people to live safely and securely.
grow uk economy at a sustainable rate to achieve rising prosperity.

Question 4

give 2 features of public goods

Answer 4

non - excludable: individuals cannot be prevented from enjoying the benefits of public goods for eg street lighting and violent criminals behind bars

non rivalry - one person gaining a consumption or good does not prevent others from also gaining from the good / service for eg getting justice at law courts

Question 5

define merit goods

Answer 5

goods that if left solely to private sectors, would be under-consumed therefore the government steps in to ensure they are provided with sufficient quality

Question 6

2 examples of merit goods

Answer 6

education
healthcare

Question 7

what are goods said to have?

Answer 7

positive externalities

Question 8

evaluate the role of public and private sectors in the provision of goods and services. give three

Answer 8

public sector provides merit goods which would be under consumed if provided by private sector, this would be detrimental to society as some merit goods improve quality of life however the burden of the government running these services is high leading to many state-owned businesses being sold to the private sector, also the private sector find it easier to raise capital when required which is important in terms of investing in modernisation

private sector cannot charge people using public sector goods as it is difficult to collect money from individuals for the use of certain public goods like street lighting armed services and street cleaning however even when profits aren’t possible, private sector charities can provide necessary services to the community

public sector may be looking at long run view of things whilst private looks at short-term returns however the private sector is answerable to shareholders/business owners whose main motivation is profit, forcing the organisation to be more efficient and cut out waste whereas the public sector is motivated by other things making the firm inefficient as there is no competition so no incentive to cut costs/ innovate