The elements of a mixed economy - the public and private sectors
Yvonne Harvey, Contributor

Hello Everyone. I hope you all did the research on privatisation I gave you to do last week.

Our task today is to look at the dominant feature of a mixed economic system which is the existence of two definite sectors - the private and the public.

This lesson will outline the characteristics of the private and public sectors. It will also highlight the differences in motivation and orientation of the two sectors.

We will begin by considering the term, 'sector of an economy'.

The sector of an economy refers to a section, division or part of an economy. In the mixed economy, the private sector involves areas of economic activity in which economic decisions are made primarily by individual households and businesses and the public sector is where areas of economic decisions are made primarily by the government.

Now let us move on to the comparison of the two sectors.

Private sector versus the Public sector

• The private sector consists of private individuals, private businesses and the market place. The public sector, on the other hand, consists of state or government-owned enterprises.
• The private sector raises its funds through personal and family savings or inheritances, borrowing from banks and other financial institutions, selling shares and through private loans.
  On the other hand, the public sector raises its funds by selling government bonds and treasury bills, revenue collected from taxes, grants from overseas and loans from home and abroad.
• In allocating or distributing the scarce resources that it owns, the private sector is motivated by the opportunity to maximise profits. The public sector, though, allocates the scarce resources it owns and seeks to maximise social welfare.
• The private sector allocates resources to the production of luxury-type goods and services, for example, furniture and cars. The public sector, however, allocates resources to the production of goods and services that are considered to be necessary to the general well-being of society, for example, utilities such as water.
• The prices of public-sector goods and services tend to be lower and, therefore, more affordable than private- sector goods and services.
• Business operations of the private sector rarely operate at a loss. Public- sector businesses tend to operate at a loss for prolonged periods of time.
• In terms of employment, they both employ a significant number of persons. However, as the public sector privatises more businesses and a greater number of individuals become self-employed, we can conclude that the private sector is a larger employer of labour than the public sector.
• The private sector functions with little or no government intervention, while the public sector intervenes in the private sector to regulate it when necessary.
• The types of businesses that fall under each sector also differ:

Those of you who have been following the lessons since the start of this academic year will realise that we have already covered the above businesses in detail.

Please bear in mind that although there are major differences between the two sectors, they do not conflict nor do they compete with each other. Rather, they complement each other and purchase goods and services from each other in order to operate efficiently.

In addition, the two sectors often give advice to each other in order to carry out their interests.

Now it's question time. Prepare an outline to the following question:

(a) Explain the term, 'sector of an economy'. (2 marks)

(b) Discuss FOUR differences between the private sector and the public sector.
(8 marks)

(c) Outline TWO ways in which the TWO sectors complement each other.
(4 marks)

(d) Name THREE public sector businesses and THREE private sector businesses.
(6 marks)

Total marks: 20

This concludes our lesson for today.
Next week, we will begin to differentiate among the different economic systems. You may wish to read up on this area. So take care, until next week.

This Convent of Mercy Academy (Alpha) student enjoys worship during Kingston College's Inter-Schools Christian Fellowship gospel concert dubbed: 'Power in the Blood: Freedom Stems from the Root', at their Melbourne campus, Upper Elletson Road, on Friday, January 18. - Anthony Minott/Freelance Photographer

Yvonne Harvey teaches at Glenmuir High School.