Economics Unit 2 - Public and Private Sectors

Describe the main features of private sector firms in terms of ownership, control and aims/objectives? 

Private sector firms are owned by the general public, while on the other hand, public sector firms are owned by the country as a whole. In addition, private sector businesses are controlled by the people who own them, and public sector businesses are accountable to the government. These two sectors have different aims and objectives. The private sector firms, for instance, aim to maximise profits for their owners. In contrast, public sector firms mainly aim to provide a service to the general public.  

Distinguish between the Public Sector and the Private Sector. 

Private sector: An economy made up of all the organizations and firms owned by members of the general public. Furthermore, it consists of private individuals and voluntary organizations.  

Pulic sector: An economy owned and controlled y a government. It consists of government organizations, and goods and services provided by the government such as state education, roads, public parks etc. 

Different Types of Firms:

Sole Traders: 

A one person business with unlimited liability, a sole trader is the one of the most basic and oldest type of business in the world. This type of business is owned by one person, who will have personal contact with the customers and staff. The owner must raise all the finances independently to run the business. Can have more than one employee but it will always be owned and controlled by only one person. 

Advantages:

Sole trader is a very personal one: Owners of this business will be able to have personal contact with the customers and staff. Because of this, the owner would be able to find out quickly what people want. This will make them be able to allocate their sources to maximize his or her profits. Also, consumers can be loyal to the business.

Sole trader is his/her own boss: Because the owner is the only owner of a business, the sole trader does not need to ask other's permission before making a decision. They have the highest degree of control.

The sole trader receives all the profits. 

Disadvantages

The owner will have unlimited liabilities, meaning that the owner is responsible for all the payments of debts.

Sole traders lack capital. 

Sole traders have full responsibility. They need to manage the business, do the book-keeping, advertising, buying and selling, and many other things.

Most of the time, sole traders require a wide range of skills. They may also need to work for longer hours. 

Partnerships 

Partnerships are agreements or declarations between individuals. This agreement is to jointly own and run an enterprise, contribute to it by combing heir money and knowledge, and share in profits. 

Advantages: Partners can bring new skills and ideas to a business

More partners mean more money for the business. If there is a partnership, there will be more shares in the business. This money can be used to expand the business. 

Everyone can contribute…