YEAR 10 STUDY GUIDE: IGCSE ECONOMICS

SYLLABUS AREA B2 & B3: PUBLIC AND

PRIVATE SECTORS/COMPETITION
OBJECTIVES: AFTER COMPLETING THIS SECTION YOU
SHOULD BE ABLE TO DO THE FOLLOWING:
1. Describe the main features of private sector firms in terms of ownership,
control and aims/objectives?
Ownership
Control
Aims/Objectives
Sole Trader
Sole owner,
Sole owner,
Make profit
founder
founder
Partnerships
Partners
Partners
Make Profit
LTDs
Shareholders
Directors
Make Profit
PLCs
Shareholders
Directors
2. Distinguish between the Public Sector and the Private Sector.
Public Sector Owned by government, run by government, funded through
taxpayers, money goes to improve services or pay off debt, tend not to make
large profit
Private Sector Owned privately, run privately, funded through capital
3. Outline the main arguments for state control of certain industries.
State control prevents monopolies, ensures safety, prevents abuse of power,
protects the environment
4. Discuss why many of these industries are being privatised throughout the
world.
Many industries are being privatised to raise capital for the government, make
the industry more competitive, and to give consumers greater choice.
5. Discuss the effects of privatisation on consumers, workers, firms, government
and the economy.
Advantages
Disadvantages
Government
Raises revenue
No control
Doesnt have to look
Jobs may be lost
after industry
Workers
Higher pay
Less pay
Growth of industry
May be laid off
Taxpayers
Less taxes for services
Services may cost more
then before
Consumers
Quality of service
Firms may care more
increases because of
about profit than
competition
consumer interest
Shareholders

Many people have the

opportunity to own part
of a business

They may not have much

say due to large
companies buying shares

6. Using real world examples from your own economy, describe the main forms
of competition in the marketplace ie perfect, oligopoly, monopoly and
imperfect.
Perfect Competition Fixed price, lots of firms, no one dominating firm, same
price and product
Monopoly One firm sells product / dominates market, Firm sets price due to
sole provider, Abnormal Profits
Oligopoly A few firms dominate the market, Price makers due to less
competition, can collude for abnormal profits
7. Examine the benefits and drawbacks of each form of competition in terms of
efficiency, choice, quality and innovation.
Efficiency
Choice
Quality&Innovation
Perfect
Prices not set by
Lots of choice
Higher quality due
one firm, similar from competing
to competition
efficiency, Price
firms
takers. Effeciency
will be greater to
maximise profit
Imperfect
Oligopoly
Prices set by
Less choice, can
Less innovation due
firms, Price
be set by firms
to less competition,
makers. Not as
due to collusion
OK quality due to
efficient as
less pressure to
perfect market
stand out
Monopoly
Price set by one
Choice set by
Tends to have less
firm, can lead to
firm
quality as no
abnormal profit.
competition means
Not as efficient as
take it or leave it.
no competition
Innovation leads to
maximising output
(efficiency) which
can be transferred
to the consumer.
8. Explain why and how governments seek to control monopoly power and how
they achieve this, through monopoly and merger legislation.
To control monopoly power, governments put competition laws in place to
prevent companies from owning too much market share. They can impose fines
and imprisonment on firms that break the law. Merger laws prevent mergers
and takeovers from happening when they effectively lessen competition to a
significant degree. This decreases the quality of product the consumer receives
and slows economic growth.
9.

Investigate government regulation to influence location of firms solutions

to regional problems of unemployment, congestion and income inequality

CRITICAL THINKING SKILLS

-

Who gains and who loses from privatisation of state industries?

Should big companies be allowed to merge?

REFERENCES
Moynihan and Titley: Chapters 5, 7 and10
Anderton: Units 34 to 36 and 40 to 44

KEY TERMS
Sole trader
Partnership
Limited liability
Incorporation
Board of Directors
Shareholders
Co-operative
Public Corporation
Nationalisation Privatisation Product differentiation Branding
Barriers to entry Regulation Merger`