Pink asked in Social ScienceEconomics · 1 decade ago

compare and contrast private ad public sector?

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  • 1 decade ago
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    The private sector refers to the activities of individuals and companies. The public sector refers to government.

    Virtually all economists agree that the private sector is better at allocating resources efficiently than the government. This is because the marketplace uses price signals. For example, if the price of something rises, people who buy that item immediately look for alternatives or make do with a little less, and people who sell that item immediately look for ways to produce more of it. All of this happens very quickly, without any government prodding, because both the buyers and sellers are acting in their own best interests.

    The public sector is necessary because not all considerations are "priced-in" to private sector transactions. Pollution is a classic example. In order to produce some products the air or water gets dirtier. In the absence of any public sector regulation, neither the buyer nor the seller pay for this damage. The general public suffers. With government regulation, however, some "cost" is included in the transaction (eg a permit to emit certain emissions). This causes the price to rise and the quantity demanded to be smaller.

    The public sector can also supply goods and services in its own right. The traditional criticism of this is that the agency involved is a monopoly. Because it's a monopoly, not subject to competition, is has no motivation to improve its products and services.

  • 1 decade ago

    I don't even know what that is....

    Source(s): sorry
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