Definitions of the Three Economic Sectors

For Profit Firms:

• They make and sell private goods and services.
• Their ultimate goal is to make a profit in selling or making goods and services.
• The "market" (supply, demand, buyers, sellers) influences their decisions.
• They work towards customer satisfaction.
• Customers voluntarily pay to purchase their goods or services.
• They are able to give the buyer what he or she wants at the lowest cost possible (while still making a profit).
• They will not take on unprofitable activities.

Government:

• It provides public goods*, or services that are needed by the public (national defense, parks, etc.).
• It can regulate the for profit firms (e.g., trust-busting, environmental requirements, etc.).
• It can control areas of society through taxes/fees (e.g., public schools receive funding through taxes).
• Its focus should be on serving the needs of the nation and the people.

Nonprofit Organizations:

• They can provide public goods or services needed by the public.
• They can provide private goods.
• These organizations receive trust from those receiving the service and those supporting the service.
• Funding comes from voluntary giving of their supporters or grant funding.
• Their main focus is to accomplish organizational goals and break even with money coming in but no profit.

* Public goods There are two characteristics of public goods:

• Nonexcludability: consumers cannot be prevented from using or benefiting from it.
• Nonrivalry: one person's use does not reduce the amount available for use by others.