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Question 1:

Classified advertising differs from standard advertising or business models in that it allows private individuals (not simply companies or corporate entities) to solicit sales for products and services.

'private individuals', I beieve, 'private' is used as an adjective here. Which definition of private does fit here?

Question 2:
1: Which definition of private does fit here?
2: Which definition of private fit here.

The first one is a question and the second one is statement. But both can serve the same purpose, I believe and both will received as a question by a listner or reader. Do I make any sense? Which one shouldn't be used where?

Please help.
Comments  
1-- I like the American Heritage better: 'Undertaken on an individual basis: private studies; private research.'

2-- Both are questions; you have merely omitted to use the question mark in the second. Both are grammatically incorrect, and should read:

1: Which definition of 'private' fits here?
2: Which definition of 'private' fits here?
re: Classified advertising differs from standard advertising or business models in that it allows private individuals (not simply companies or corporate entities) to solicit sales for products and services.

What difference does it make to use 'private individuals' instead of 'individuals' in the given context? Perhaps it clarifies the point that those individuals are not associated or representing any market entity; whatever they are offering comes directly from them.

re: Which definition of 'private' fits here?

I'm confused. Consider these:
Which tie should I wear? and, Which tie I should wear.
Which of those houses do you live in? and, Which of those houses you live in.

If there is no need to use 'does' in the beloe sentence, or there is no inversion, in the sentence 'Which definition of 'private' fits here?', then why are there inversions (should I, do you) in the first version of both sentences above?
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1-- 'Private individuals' makes the meaning very clear, as you say.

2-- tie and houses are objects.
You mean when the things in discussion are physical objects (you aren't referring to grammatical object, are you?) inversion takes place. Please let me know.
Yes, grammatical object:

Which tie should I wear?-- VS

Which definition of private fits here? -- SV

Or have I missed your point?
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The whole point break down to:
If 'which' is followed by an object (and there is also a subject), inversion will occur; and if there is no object only subject then no inversion. Am I having it right? Would you like to add something? Please let me know.
I think that is right, but I have not pursued the topic in detail.
Jackson6612The whole point break down to:If 'which' is followed by an object (and there is also a subject), inversion will occur; and if there is no object only subject then no inversion. Am I having it right? Would you like to add something? Please let me know.
Thanks, Mr. Micawber. I would request you to review the quoted text so that the usage doesn't confuse me next time.
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