Public and Private Sectors

Public and Private Sectors

• Public Sector – this refers to anything provided by the government and any firms which are owned by the government, e.g. police 
• Public sector organisations may charge for their services but are generally financed by taxation
• The public sector does not have a profit incentive to use their scarce resources effectively

• Private Sector – includes all firms which are owned by private individuals or groups of individuals, e.g. BP
• The public sector does have a profit incentive to use their scarce resources effectively

As the private sector is more efficient than the public sector, the government will sometimes pay private firms to run services for them. This leads to improved efficiency which can save tax payers’ money.