🏥 Healthcare
In many countries the government runs hospitals and pays for treatment, so people can be treated even if they cannot pay at the time.
The Mixed Economy » Who Produces What: Public and Private Sectors Compared
What you'll learn this session
Study time: 30 minutes
Edexcel spec: 1.1.5 (h) and (i)
- Which goods and services the public sector and the private sector usually produce
- Why healthcare, education and transport are often shared between both sectors
- How the importance of each sector differs from economy to economy
- How a more market-led economy compares with a more state-led one
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Unlock This CourseWho makes what?
Every economy has to decide who will produce its goods and services. In a mixed economy, the answer is "both sectors". This lesson is about which goods and services each sector tends to provide, and why. It is examined on Paper 1 (Microeconomics and Business Economics).
You have already met the two sectors. Now let us see what each one actually produces.
The role of the private sector
Supermarkets are run by the private sector, which produces most of the everyday goods we buy
The private sector produces most of the goods and services we buy in everyday life. It produces things that people are willing and able to pay for.
- Retail: supermarkets, clothes shops, online stores and corner shops are private businesses.
- Consumer goods: phones, trainers, cars, food and drinks are made by private firms.
- Entertainment and leisure: cinemas, gyms, restaurants and holiday companies.
- Some healthcare, education and transport: private hospitals, private schools, taxi firms and airlines.
Private firms are good at responding to what consumers want. If demand rises, they can expand and make more. If a product stops selling, they stop making it.
The role of the public sector
Public libraries are provided by the public sector so everyone can use them, not to make a profit
The public sector tends to produce goods and services that the private sector would not provide at all, or would provide unfairly or in the wrong amounts. These are often things society believes everyone should be able to use, whatever their income.
🏫 Education
Governments run state schools so that every child can get an education, not just children whose families can afford fees.
🛣️ Transport
Governments often build and look after roads, which everyone uses. Some bus and train services may also be run or supported by the government.
📚 Libraries and bridges
Public libraries, bridges and local parks are usually provided by local or national government, so that everyone can use them without paying each time.
The public sector is paid for mainly by taxes, not by prices charged at the point of use.
A shared job
The same industry can have both sectors in it. This is what makes an economy "mixed".
| Industry | Public sector provides | Private sector provides |
|---|---|---|
| Healthcare | Hospitals and clinics paid for by taxes | Private hospitals and dentists that charge patients or insurers |
| Education | State schools and colleges | Fee-paying schools and private tutors |
| Transport | Roads, and some bus and rail services | Taxi firms, airlines, some bus operators |
| Retail | Very little | Almost all shops, online and on the high street |
Retail is the clearest example of a private sector industry. Healthcare and education show the two sectors working side by side.
Different economies, different balance
No two countries have the same balance of public and private sector. The size of each depends on the country's history, its values and the choices of its government. We can compare two ends of a scale in general terms.
💰 More market-led
The private sector is large and important. Most goods and services, including much healthcare and education, are produced by private firms. The government usually plays a smaller part. The USA is often given as an example of an economy leaning this way.
🏛️ More state-led
The public sector is large and important. The government owns many businesses, runs most key services and makes many of the decisions about what is produced. Cuba and North Korea are often given as examples of economies leaning this way.
Most countries sit somewhere between these two ends. The United Kingdom has a large private sector, but the government also runs the NHS and state schools. No real economy is completely market-led or completely state-led.
Key point: "more market-led" and "more state-led" describe where an economy sits on a scale. They are not two separate types.
Strengths and weaknesses of each approach
More market-led
Good: firms compete, so there is often more choice and a quick response to what consumers want. Bad: people with low incomes may struggle to afford services like healthcare, and public goods may not be provided.
More state-led
Good: key services can be shared more equally and public goods are provided. Bad: the government may not know what consumers want, there may be less choice, and the cost falls on taxpayers.
Common mistakes
Saying the private sector never provides healthcare or education. It does, in most economies. Another mistake is saying a country is "fully public" or "fully private". Say "more" or "less" market-led. Also, never make up figures for how big each sector is in a country. Describe the balance in words.
Exam-style question
Read the context, then answer the questions. This is a Paper 1 style question.
Country X has many private hospitals and private schools, and most shops and transport firms are privately owned. The government runs some state schools and a public health service. Country Y has a government that owns most hospitals, schools, transport and large factories.
(a) Identify one good or service usually produced by the public sector. [1 mark]
(b) Explain why a country might have both private and public hospitals. [2 marks]
(c) Analyse one difference between the roles of the public and private sectors in Country X and Country Y. [4 marks]
Model answer
(a) Police, state education, street lighting or roads (any one) (1).
(b) The government may run hospitals so that people can get treatment even if they cannot afford to pay (1). Private hospitals can also exist because some people are willing and able to pay for extra services, and firms can earn a profit by providing them (1).
(c) In Country X the private sector produces most goods and services, including many hospitals and schools, so it is more market-led (1). Firms compete for customers, so consumers are likely to have more choice (1). In Country Y the government owns most hospitals, schools and factories, so it is more state-led (1). The government decides more of what is produced and may not know what consumers want, so choice may be more limited (1).
Exam tip
In a comparison question, name both countries in every point. Say what is true for X, what is true for Y, and then link it to "more market-led" or "more state-led".