Final answer:
Nonprofit organizations exist because they serve unmet needs, enable collective action, or advocate for issues. Examples include humanitarian aid groups like the Red Cross, homeowner's associations, and professional advocacy organizations. They play a critical role in society that complements government and private sectors.
Step-by-step explanation:
Three theories explain the existence of the nonprofit sector. First, nonprofits serve the needs not met by the private sector or government, often driven by social goals rather than profit. An example is a charity like the Red Cross, providing disaster relief and humanitarian aid where government and private sectors cannot efficiently operate.
Second, nonprofits can arise from the desire for collective action, where individuals with common interests come together to pursue goals that benefit them, like a homeowner's association working towards neighborhood improvement. Finally, nonprofits may also emerge to advocate for certain issues or represent the interests of a group, such as lobbying organizations or professional associations that can influence policy and provide a collective voice for their members.
All of these organizations contribute to the economy, not through financial profit but by improving social welfare, community engagement, and representing diverse interests in society. Such organizations illustrate why there is a need for entities beyond those that exist for profit, as they fulfill essential roles that supplement the private and governmental sectors.