What are the Public and Private Sectors? - Introduction to Business Activity

An activity that introduces Business Activity for Level 2.

Introduction to Business Activity - What are the Public and Private Sectors?

Some business activity exists to make a profit. In the end, if the business does not make a profit it will have to close - although not always for many years! However, some business activity will not necessarily make any profit but will continue to function.

Street lights

Image: Street lights provide a service but who pays for them? Is there a business that provides street lighting? Copyright: Sanjin Spasojevic, stock.xchng

Look at the following explanations:

The public sector is the part of the economy where goods and services are provided by the government or local authorities. These goods and services are sometimes provided free and in other cases consumers have to pay a price. The aim of public sector activity is to provide services that benefit the public as a whole. This is because it would be difficult to charge people for the goods and services concerned or people may not be able to afford to pay for them. The government provide these goods and services at a cheaper price than if they were provided by a profit making company. The public sector accounts for about 40% of all business activity.


The private sector consists of business activity that is owned, financed and run by private individuals. These businesses can be small firms owned by just one person, or large multi-national businesses that operate around the world (globally). In the case of large businesses, there might be many thousands of owners involved. The goal of businesses in the private sector is to make a profit.

Here's a summary of public and private sector organisations:

Organisation - a group of people trying to do something
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Privately owned organisations - businesses which sell us things - banks, shops, hotels, hairdressers and travel agents, for example Publicly owned organisations - things done for us by government - hospitals and schools, for example
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Small businesses owned by one or a few people Big businesses owned by thousands of shareholders Central government - the government run by Parliament in London Local government - the local council

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