Private and Public Sector Flashcards
Private sector businesses
Private sector: where private individuals own and run business ventures. Their aim is to make a profit, and all costs and risks of the business are undertaken by the individual. Examples: Nike, McDonald’s, Virgin Airlines etc.
Public sector businesses
Public sector: where the government owns and runs business ventures.
Their aim is to provide essential public goods and services (schools, hospitals, police etc.) in order to increase the welfare of their citizens, they don’t work to earn a profit. It is funded by the taxpayers’ money, so they work in the interest of these citizens to provide them with services.
What types of economic systems do countries use when they are suffering from the problem of scarce resources
Free market,
Command/Planned economy,
Mixed economy,
Features of a free market economy
All resources are owned privately
No government control over land, capital and labor
Businesses produce to make a profit
Good in high demand are produced more because they are more profitable
Goods in low demand are produced less because they are less profitable
Prices of items depend upon the supply of demand of them
Advantages of Free market economy
Consumers can choose what to buy
Workers are encouraged to work hard because taxes are low and they keep most of their incomes
Competition amongst businesses makes prices low
New businesses are encouraged to start up to make profit
Disadvantages of a Free market Economy
Only who can afford the private services will benefit from them because the public ones are free vs the expensive private ones
There might be many uncontrolled recessions and booms in the economy because the government doesn’t control it
Businesses might be inclined to create a monopoly to increase prices
Closest country to a full free market economy
USA
Mixed economy features
It combines features from a free market and planned/controlled economies
Nearly all countries have a mixed economy with both a private and public
sector
Private sector businesses features
Most businesses will run to make a profit
The businesses choose everything about the product they are going to sell. This is influenced a lot by the customers opinions
Made up of businesses not owned by the government
Public sector businesses features
They are made up of government, state owned and controlled businesses and organizations
The government chooses what to sell and the price
Some goods and services are free of charge like healthcare and education.
Service to the community is the main objective
The money comes from taxes
