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DEFINITION
A firm is an business organization in which goods and services are provided.
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | A firm is the unit
in which goods and services are produced
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![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | A firm is the
producers unit in which factors of production are converted into output. |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) |
A firm is the producer unit under one management and control. |
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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
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Textiles industry,
Khanga, vitenge blankets |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | There is different
management control and supervisor |
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1.The
aim of the firm is to maximize profit through;
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | By decreasing the
price of the commodity |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | By increasing the
price of the commodity |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | By lowering the
costs of production |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | By improving
research and innovations to improve the quality of the products. |
2.To
promote the national interest eg
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | To create employment. |
3.Enjoying
economies of scale (output maximization)
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Embark/deal with
large scale production |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Create more output. |
4.Sales
Maximization:
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Firms also follow
sales Maximization Managers wants to expand company sales even at the
expenses of profits. |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Can sell as much as
possible. |
5.
Utility Maximization
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | The firm produce as
much as it can to maximize the statistic of the consumers (utility
maximization objective) |
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LOCATION
OF THE FIRM
Always the entrepreneur will locate his
firm in a location, which minimizes the private costs of production.
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FACTORS
WHICH INFLUENCE THE
LOCATION OF THE FIRM |
The
location of the firm is influenced by
1. Availability of raw materials
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Must
be the source of raw materials |
2.
Market Availability
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Must be market
source of the product |
3.
Improved infrastructure
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Availability of
transport |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Reliable of water
supply |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Reliable
of electricity. |
4.
Source of labour
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Easier to get cheap
labour and skilled |
5.Good
government policy
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Government should
provide incentives to industrialization eg subsidies (loans) etc |
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ARGUMENTS
FOR LOCALIZATION |
1.Developments
of new industries
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Investment of new industries |
2.
Emergence of external economies of scale
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Firm
will enjoy large-scale production. |
3. Leads to
development of infrastructure
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Reliable communication and
transportation |
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Ware housing |
4. Expansion of
the market
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | (Over seas) Create market
availability of the product. |
5. Basis of
urbanization
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tF7SGFby1bS1BLsXKlcEAVTfrohAvr8K9YTWaqm_VUIw8Gje9_Tfxmu0Z_rui2Ua6V9XKPoxl-gmqH0nXi-kKRNhP9ijNCYR4JdFe2ArHUODHO=s0-d) | Formation of towns cities etc |
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