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ARBITRAGE: Buying something in one market then immediately (or as soon as possible) selling it in another market for (hopefully) a higher price. Arbitrage is a common practice in financial markets. For example, an aspiring financial tycoon might buy a million dollars worth of Japanese yen in the Tokyo foreign exchange market then resell it immediately in the New York foreign exchange market for more than a million dollars. Arbitrage of this sort does two things. First, it often makes arbitragers wealthy. Second, it reduces or eliminates price differences that exist between two markets for the same good.
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                           PRIVATE SECTOR: The combination of households and businesses into a single group. It is termed the private sector to indicate that decisions are made by private individuals (either consumers or producers) in pursuit of their personal self-interests. The contrasting phrase is public sector, in which decisions are made by governments on behalf of the public. The private sector is comprised of the household sector and the business sector, but excludes the government sector. While the private sector, in essence, includes every member of society, it does not include everything that everyone does. The private sector is best specified from a functional perspective--by what people do, not who they are. People are part of the private sector when they are buying goods, working in factories, running companies, and engaging in market exchanges. However, they are part of the public sector when they are serving in elected public offices, working in the military, or working for a government agency.Two SectorsThe private sector includes the household sector and the business sector.- Household Sector: The household sector includes the entire, wants and-needs-satisfying population of the economy when that population is engaged in eating, breathing, and consuming. This sector includes everyone seeking to satisfy unlimited wants and needs, when they are busy seeking to satisfy unlimited wants and needs.
- Business Sector: The business sector contains the private, profit-seeking firms in the economy that combine scarce resources into the production of wants-and-needs satisfying goods and services. The key economic function of the business sector is the production of goods and services.
An Ongoing Allocation DebateA distinction between the private sector and the public sector reflects the two basic methods of answering the three questions of allocation--markets and government. The private sector relies on markets and the private ownership and control of resources for voluntary allocation decisions. The public sector relies on government decisions that are involuntarily imposed on the economy that (in theory at least) are made on behalf of the public.The terms private sector and public sector reflect the ongoing debate over the degree of government involvement in the economy. Some debaters (liberals) say that a lot of involvement is needed, others (conservatives) say very little is needed. While this debate is unlikely to be concluded (EVER!), evidence to date indicates some government intervention can be useful, just not too much.
Recommended Citation:PRIVATE SECTOR, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: January 26, 2025].
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John Maynard Keynes was born the same year Karl Marx died.
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UTP
Unfair Trade Practice
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