Economics Section B Part 3

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Who owns and controls public sector organisations?
The government- local/central, e.g. central gov departments, local authority services, executive agencies etc. Usually funded from tax revenue; govs also borrow money and charge for some services.
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Who owns and controls private sector organisations?
Individuals. Many different types of organisation (vary according to legal ownership & size). Majority are small/medium-sized. In most countries most consumer goods are made by the private sector
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What are the aims of public sector organisations?
Improve quality of services (reliability, professionalism, customer service, service speed); minimise costs (gov resources are scarce- reduce burden on taxpayer); allow for social costs & benefits (making profit not aim- can consider needs of others)
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What are the aims of private sector organisations?
Profit making; profit maximisation; social responsibility; sales maximisation; growth; survival.
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Why might there be a need for government regulation?
Control monopolies and mergers; if one/ a few firms dominate, consuemrs may be exploited; firms may use restrictive practices (high prices, restricted choice, barriers to entry, collusion).
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How can a government promote competition?
Encourage growth of small firms (more comp); lower barriers to entry; introduce legislation (laws can be made to protect consumers).
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Why does the government influence firm location?
Unemployment (to provide jobs in declining areas); congestion (reduce development- congestion & housing shortages mean a burden on local services); income inequality (locate firms in poorer areas).
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How can the government influence firm location?
Financial incentives e.g. investment grants, money for training, gov investment in infrastructure, employment subsidies; refusing planning permission in congested areas.
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What is privatisation?
The transfer of public sector assets to the private sector. E.g. sale of nationalised industries (large, provide key services), deregulation (lift legal restrictions that prevent comp), contracting out, sale of land/property.
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What are the motives for privatisation?
Inefficient nationalised industries (make heavy losses); generate income for gov; deregulation (firms can compete effectively with new entrants); reduce political interference (gov cannot interfere in private sector firms).
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What are the effects of privatisation for consumers?
Prices for some services fall; prices for other services rise sharply; some new products and services arrive due to more innovation.
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What are the effects of privatisation for workers?
Some may be laid off; some may be forced to adopt more flexible working practices.
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What are the effects of privatisation for firms?
Changed objectives (profit); increased investment; mergers & takeovers often involve newly privatised firms.
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What are the effects of privatisation for the government?
Receive sale proceeds; burden of loss-making removed; may be expensive as lots is spent advertising the sale; no longer responsible for running firm and so can focus of task of governing.
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What are the effects of privatisation for the economy?
If it results in more competition then the economy will grow; costs are lower, less waste, more innovation; drive for efficiency may result in job losses and higher benefit payments; public monopolies may become private and consumers be exploited.
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Other cards in this set

Card 2

Front

Who owns and controls private sector organisations?

Back

Individuals. Many different types of organisation (vary according to legal ownership & size). Majority are small/medium-sized. In most countries most consumer goods are made by the private sector

Card 3

Front

What are the aims of public sector organisations?

Back

Preview of the front of card 3

Card 4

Front

What are the aims of private sector organisations?

Back

Preview of the front of card 4

Card 5

Front

Why might there be a need for government regulation?

Back

Preview of the front of card 5
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