Market sectors

Question 1

What are the 2 sectors of the economy

Answer 1

The private sector and the public sector

Question 2

What are the characteristics of the private sector

Answer 2

• Owned by individuals
• Aim to make a profit
• Examples are sole traders, partnerships and companies

Question 3

What are the characteristics of the public sector

Answer 3

• Owned by the government
• Acquires finance from taxes
• Aims to provide a service and improve it

Question 4

What are the aims of the private sector

Answer 4

• Survival
• Increasing shareholder value
• Growth
• Market share
• Operating ethically

Question 5

What are public goods

Answer 5

Goods that are non-excludable (everyone can use them) and non-rival (consumption by one doesn’t generally affect supply for others)

Question 6

What are merit goods?

Answer 6

Goods that bring wider benefits to society

Question 7

Why is the public sector important

Answer 7

• Large amounts of employment
• They provide public goods which would not be provided by the private sector
• Subsidise merit goods that would be under provided

Question 8

What are the pros and cons of the private sector

Answer 8

Pros:
- Competition forces higher quality goods with lower prices
- They pay tax
- Profit generated can improve products

Cons:
- Doesn’t cater for those on low incomes
- Possible exploitation
- Chance of monopolies

Question 9

What are the pros and cons of the public sector

Answer 9

Pros:
- Provides essentials at lower prices
- Benefits those on lower income
- Provides public goods and subsidises merit goods

Cons:
- Quality may be lower as no competition
- Dependant on government priorities