The mixed economy: public and private sectors Cambridge IGCSE Business Studies revision
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In plain words
No real country leaves everything to the market, and none plans everything from the centre. Every economy is a mixture: private firms sell most goods, and the government provides some things, such as roads, schools and the police.
Countries differ in where they draw the line.
5 things to know
- A mixed economic system has both a private sector and a public sector, and resources are allocated partly by the price mechanism and partly by the government.
- The private sector is owned and controlled by individuals and firms. Its main aim is usually profit.
- The public sector is owned and controlled by the government. Its aim is to provide services and improve welfare, not to make a profit.
- Advantages: public goods and merit goods are provided, harmful goods can be discouraged, and incomes can be made less unequal, while consumers still have choice and firms still have incentives.
- Disadvantages: taxes are needed to pay for it and may reduce the incentive to work, state-run organisations may be inefficient without competition, and regulations add to firms' costs.
Tips and tricks
- Public sector does not mean "open to the public". A public limited company is in the private sector. The public sector is whatever the government owns.
- The size of the public sector differs between countries: describe an economy as having a larger or smaller public sector, not as simply "mixed".
It lands in your notebook with its questions as flashcards.
The mixed economy: public and private sectors: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
Which organisation is in the public sector?
The public sector is what the government owns. A public limited company is owned by private shareholders.
What is the main aim of most private sector firms?
Private owners usually seek profit.
In a mixed economy, resources are allocated by
That mixture is what the name means.
Which is a possible disadvantage of a large public sector?
Government services are paid for mainly from taxation.
Why do governments in mixed economies provide healthcare?
Some people could not afford it, and people underestimate its benefits.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 7 marks. Write your answers on paper, then check them.
The mixed economy: public and private sectors
Cambridge IGCSE Business Studies 0450 · 7 marks · papermunch.org
Name ______________________________ Date ______________
Define a mixed economic system.[2]
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An economy with both a private sector and a public sector, in which resources are allocated by both the price mechanism and the government.
State two differences between the public sector and the private sector.[2]
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The public sector is owned by the government and aims to provide services; the private sector is owned by individuals and firms and aims to make a profit.
Explain one advantage of a mixed economy over a pure market economy.[3]
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The government can provide public goods such as street lighting and defence, which private firms would not supply because they cannot charge the people who benefit.
Answers: The mixed economy: public and private sectors
- 1. An economy with both a private sector and a public sector, in which resources are allocated by both the price mechanism and the government.
- 2. The public sector is owned by the government and aims to provide services; the private sector is owned by individuals and firms and aims to make a profit.
- 3. The government can provide public goods such as street lighting and defence, which private firms would not supply because they cannot charge the people who benefit.