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Public & private sectors

 Reading task

Distinction between the private and the public sectors (AO2)

The private sector of the economy consists of businesses owned and run by private individuals and organizations that usually, but not always, aim to earn a profit. They operate independently of the government, although need to operate within the rules and regulations in the country. Examples of private sector businesses, which are covered in this section of the syllabus, include the following:

  • Sole traders

  • Partnerships

  • Privately traded companies

  • Publicly traded companies

  • Social enterprises, including cooperatives and non-governmental organizations

  • Multinational corporations (MNCs)

 Top tip!

Students often claim that the difference between business organizations operating in the private sector and public sector is that the former aims for profit whilst the latter aims to provide a service. Whilst this is not entirely incorrect, there are businesses that operate in the private sector that do not primarily aim to earn a profit for their owners. Examples include traditional charities, non-governmental organizations (NGOs), and not-for-profit social enterprises.

Business organizations that operate in the public sector consist of those controlled by a regional and/or national government, with the main aim being to provide essential goods and services for the general public. Such businesses can, but do not always, directly charge customers for such services. In some cases, such as government housing or state-funded education, the service is provided by and/or funded by the government.

Examples of such goods and services deemed to be of benefit to society include:

  • Infrastructure (such as communication networks, transportation networks, road and highway networks, waste disposable systems, and flood control systems)

  • Housing (public and social housing)

  • Health care services

  • Education

  • National defence (national security)

  • Renewable energy

  • Refuse collection

  • Museums

  • Public parks

  • Emergency services (ambulance, fire and police).

 

Fire services are part of the public sector

Key terms

  • The private sector of the economy consists of businesses owned and run by private individuals and organizations that usually aim to earn a profit for their owners.

  • The public sector consists of those organizations controlled by a regional and/or national government, with the main aim being to provide essential goods and services for the general public.

Return to the Unit 1.2 - Types of organizations homepage

Return to the Unit 1 - Introduction to Business Management homepage


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