Business entities

Also known as: Economic subject

Business units are amalgamations of different segments of current economic activity. They are subdivided into public and private households as well as into public and private companies.

There is a constant mutual dependency among the economic units, which controls the course of the economy (business cycle). The focus of households is primarily on consumption, while businesses concentrate on making goods and services available to other businesses and households.

Business entities (VWL)

Private households

Private households are among the small economic units. They purchase manufactured goods and use services to meet their own needs. For this they have to pay with money, for which they in turn enter into employment relationships in service or production branches in which products and services are created and made available.

Public budgets

Public budgets are the larger structures responsible for meeting the needs of communities. This venture is financed through the payment of tax payments to the general public. Both private households and companies are liable to pay taxes.

Establishments

Businesses are responsible for manufacturing goods in the form of material products or services and thus satisfying the needs of others. It is similar with public companies. In comparison to the public, private companies are left to fend for themselves. They procure the raw materials they need for their production with the help of their profits.

If they can no longer keep this chain, they go bankrupt. Public companies, on the other hand, receive some support from public budgets (subsidies). Nevertheless, just like private companies, they have to work economically, ie they have to achieve the greatest possible profit with the least possible use of materials.

Public companies

Public companies are those companies that are either wholly or partially owned by the public sector. The so-called public sector is a collective term for the entire public sector, in particular corporations such as the federal government, states and communities.

Ähnlich wie bei den öffentlichen Haushalten consequences die öffentlichen Betriebe allgemeinen volkswirtschaftlichen und sozialen Interessen, während eine ständige Gewinnmaximierung deren Ziel sein muss, um weiterhin wettbewerbsfähig zu sein und zu wachsen.

However, the weighting of these two economic units differs from country to country.

Objectives of the business units

  • Maximizing benefits through targeted use of household income
  • Profit maximization of private companies / companies
  • Increased benefit for the general public on the part of public companies / households
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