distinction between private and public sectors

ways firms can be classified

public or private sectors, type of legal ownership, sector in which they operate, for-profit or non-profit

public sector

public sector firms are controlled and owned by the government and are usually funded through taxation. they operate on a local, regional, or national government level. they retain ownership because they are strategically important or provide essential services. they often provide merit goods that may not be provided in sufficient quantities by private businesses. This can be achieved as they can achieve economies of scale

private sector

private sector firms are controlled and owned by firms and private individuals (entrepreneurs and shareholders) and are usually funded by owner’s capital, borrowing, or by using retained profits. The objective of most private sector firms is profit maximisation, therefore, the private sector can be considered more efficient than public sectors since they aim to become efficient to reduce the cost of production. The ownership varies from soletrader, partnership, and company shareholders

privatisation

Privatization occurs when government owned firms are sold to the private sector.