3.2 - How the economy functions:

• In the economy there are producers who make goods and supply services and there are consumers who buy the goods and use the services.

• We earn money doing what we are best at and buy things from other people. This is called division of labour. Hence, we are interdependent.

• We also depend on other countries. E.g. we buy oranges and cocoa from overseas.

• The government minister in charge of overseeing the economy is the CHANCELLOR OF THE EXCHEQUER (CoE). He is the head of the treasury.

• The economy is made up of the:

• Private sector:  

  • Which is owned and run by individuals or companies with shareholders.

  • Its aim is to make higher profits.

  • The majority of businesses in this sector are sole traders. These are owned by one person who is self-employed. They work for themselves and keep the profit

  • Businesses created by two or more people are called partnerships. These companies become limited companies. Shareholders receive a share in the profits. (only a minority of businesses like this on the private sector)

• Public sector:

  •  Which is owned and run by the government on behalf of the people.

  • The aim of this sector is to provide services for the…