Business Studies

The Business Environment. 
Pages 8 and 9 

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The Private Sector

The UK's economy has a large private sector providing goods and services through the operation of the price mechanism - where prices are set according to demand and supply.

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The Private Sector

The strengths of the private sector are that

- entrepreneurs and employees can create their own personal wealth through the profit motive and hard work.

- a greater range of products is supplied.

- people have greater freedom to choose and buy what they want.

- competition helps to keep prices down, and encourages new ideas.

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The UK Economy

Economic activity in the UK takes place in a mixed economy. Changes in the level of economic activity affect businesses.

These changes are known as business cycles. 

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The Public Sector

The UK's planned public sector, i.e. the part of our economy involving the work of central and local government organisations, includes national services such as education and health, and local authority organisations.
In recent years, privatisation has led to many public sector organisations being transferred to the private sector. This has sometimes led to a clash between the objective of providing a service and the objective of making a profit. 

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The Public Sector

The strengths of the planned public sector are that...

- public services don't depend on the profit motive and are supplied even at a loss

- basic services such as eduction are available to all, regardless of the people's ability to pay for them


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The Voluntary Sector

The UK has organisations in the voluntary sector, also called the non-profit sector or the 'third sector' in our economy.

Examples include, charities, volunteer community organisations and religious organisations.

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The Price Mechanism

In the private sector, the price mechanism decides what is produced. It applies to the factors of production as well as to 'high street' products.

Ideally, demand and supply are in equilibrium: the demand for a product matches its supply level. 

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