Private sector and public sector:

Private sector:

The private sector comprises of businesses owned and controlled by individuals/groups of individuals.
Their motive is to maximize profits

ADVANTAGES:

 Brings more competition and product variety to the market

 Increased use of technology
 Provides investment and employment

DISADVANTAGES:

 It will only produce products that citizens can pay for

 They engage in the production or demerit goods (E.g- Alcohol)

Public Sector:

The is where the government controls the factors of production on behalf of its citizens. Its motive is to
provide services to citizens

ADVANTAGES:

 Government provides public goods that the private sector will not provide
 The government provides welfare services to the poorer members of society
 The government sets the control mechanism in place for the conduct of the business

DISADVANTAGES:

 To finance expenditure, government can increase taxes

 Inefficient use of state resources
 There can be political interference in the public sector
Private sector and public sector:

MAIN DIFFERENCE BETWEEN THE PRIVATE AND PUBLIC SECTOR:

Difference Private sector Business Public Sector Business

Owners Private individuals The state

E.g- Shareholder of company

Aims Profit Provide important

Growth goods/services

Sources of Finance Private investors Government loans and

Loans (E.g- from bank) subsidies
Profits kept in business Profits (if any) in business

Distribution of Profit Distributed to owners Paid to government

E.g- Dividends paid to company
shareholders

Type of Products Goods and services demanded Public goods such as police,
by business customers or street lights that would not be
private customers provided by the private sector

Merit goods such as health care,

education and waste disposal
which the private sector would
not provide enough of