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DEFINITION
A firm is an business organization in which goods and services are provided.
 | A firm is the unit
in which goods and services are produced
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| A firm is the
producers unit in which factors of production are converted into output. |
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A firm is the producer unit under one management and control. |
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DEFINITION
OF AN INDUSTRY
An
industry is the combination of firms engage with production of similar or
related products.
Eg.In a
foot wear industry there are number of firms producing various components of
foot wear eg stockings, leather tanning, shoesoles, polish shoes etc
| Textiles industry,
Khanga, vitenge blankets |
| There is different
management control and supervisor |
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THE
AIM OF THE FIRM
1.The
aim of the firm is to maximize profit through;
| By decreasing the
price of the commodity |
| By increasing the
price of the commodity |
| By lowering the
costs of production |
| By improving
research and innovations to improve the quality of the products. |
2.To
promote the national interest eg
| To create employment. |
3.Enjoying
economies of scale (output maximization)
| Embark/deal with
large scale production |
| Create more output. |
4.Sales
Maximization:
| Firms also follow
sales Maximization Managers wants to expand company sales even at the
expenses of profits. |
| Can sell as much as
possible. |
5.
Utility Maximization
| The firm produce as
much as it can to maximize the statistic of the consumers (utility
maximization objective) |
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Always the entrepreneur will locate his
firm in a location, which minimizes the private costs of production. |
FACTORS
WHICH INFLUENCE THE
LOCATION OF THE FIRM |
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The
location of the firm is influenced by
1. Availability of raw materials
| Must
be the source of raw materials |
2.
Market Availability
| Must be market
source of the product |
3.
Improved infrastructure
| Availability of
transport |
| Reliable of water
supply |
| Reliable
of electricity. |
4.
Source of labour
| Easier to get cheap
labour and skilled |
5.Good
government policy
| Government should
provide incentives to industrialization eg subsidies (loans) etc |
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| ARGUMENTS
FOR LOCALIZATION |
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1.Developments
of new industries
| Investment of new industries |
2.
Emergence of external economies of scale
| Firm
will enjoy large-scale production. |
3. Leads to
development of infrastructure
| Reliable communication and
transportation |
| Ware housing |
4. Expansion of
the market
| (Over seas) Create market
availability of the product. |
5. Basis of
urbanization
| Formation of towns cities etc |
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The
Theory of the Firm|Definition
of Industry|The
Aim of The Firm|
Location of the Firm|Argument
for localization |
