Structures Flashcards
What is the private sector?
Owned and controlled by private individuals to make a profit
What are the aims of the private sector?
Survival, profit maximisation, increase market share, increase share value, increasing ethical activity.
Why is the private sector important?
-Customers have more choice.
-Innovation from large profits.
-Encourages investment from abroad.
-Pay tax to the government who can spend it on the public sector.
What is the public sector?
Owned and controlled by the Government on behalf of the tax payer
Example of the public sector:
NHS (biggest civilian employer in Europe), schools, emergency services
Why do we need the public sector?
Some goods/services are needed by everyone, but they wouldn’t be provided by the private sector as they look primarily for profit.
What is non-excludability?
Goods and services aren’t just for people who paid for them, but for anyone who qualifies.
What is non-rivalry?
One person’s consumption does not affect another’s, aka there is no limit.
What are merit goods?
Goods or services that would be under consumed if left to the private sector (e.g. Education and Healthcare), because not everyone can afford/see the benefits.
What are the positives of public sector merit goods?
Have positive externalises eg. if people complete school then they will get jobs and won’t turn to crime.
What are the public sector objectives?
-Create a fair society and efficient economy.
-Provide employment.
-Provide merit goods.
-Some goods are difficult to price.
-Raise standard of living and allows people to live safely.
Evaluating public sector:
Good because:
-Provide goods that aren’t fully provided in the private sector.
-Prevent customer exploitation and ensures everyone benefits.
-Purchasing supplies (drugs for NHS) on a large scale reduces cost.
-Have been a way to protect jobs.
However:
-Large burden on the government and can become inefficient.
What factors affect business structure?
-Type.
-If the owner wants to grow.
-If the business intends to tale high risks with lots of money.
-If the owner wishes for continuity.
What is limited liability?
Responsibility is limited to what they have already invested.
What is unlimited liability?
The owner is personally and fully responsible for all losses and debts of the business
What is libility?
The state of being legally responsible (liable) for something, such as a debt or obligation.
What is a sole trader?
A business owned by one person.
Advantages of sole traders?
easy to set up
make decisions quickly
less capital needed
taxed differently(national insurance contributions are low)
all profits kept
don’t have to make any info public
Disadvantages of sole traders?
-Unlimited liability
-(Not on the stock market)
-Banks don’t like to lend them money
-Working long hours.
-Impact of illness
How does being a sole trader impact stakeholders?
-Customers/suppliers/investors have more risk dealing with them.
-Customer may find tailored, niche products.
What is a partnership?
A business owned by 2-20 people, where each is joint liable.
What is a deed of partnership?
a legal document drawn up by a solicitor/lawyer setting up rules for the partnership
-Amount of money invested.
-How much profit each will receive.
-Roles and responsibilities.
-What will happen if one dies.
-The rules for a dissolution of partnership.
Advantages of partnerships?
-Easy to set up.
-More money from more owners.
-Shared workload.
-Increased skills
Disadvantages of partnerships?
Unlimited liability
Management disagreements
Lack of continuity
May not do equal workload.
Slower decisions
