Program Name : BBA

Semester : 3rd
Course Name: Business Economics
Course Code: BBA/II/102
Facilitator Name: Shweta Sharma
CONCEPT OF FIRM AND INDUSTRY
Introduction
 In economics, a firm holds important position as

at the firm level managerial decisions are taken.

 In common language a firm is considered as a

manufacturing unit involved in production of

goods.
 The scope of the term firm in economics is broad.

 It represents any business organization inhering

service & agriculture organization also.

Definition of Firm

1. Firm is a unit of production that employs factors of production

(or inputs) to produce goods & services under given state of
technology.
2. It is an independently administered business unit – Hanson.
3. It is a center of control where the decisions about what to
produce & how to produce are taken.
4. It is a business unit which hires productive resources for the
purpose of producing goods & services.
5. A firm is an independent organization whose destiny is
determined by the magnitude of the aggregate pay off & in
which the aggregate pay off production & sale of goods or
services ( Harvey Leibenstein).
Characteristic/features of firm 
1. It is a place where all decision making related to
production are taken viz what, where & how much to
produce.
2. It is a place where manpower is hired for production.
3. It is a place where all the resources of production are
brought together, production is done as well as sale &
distribution of the manufactured product is carried
out.
4. The state of technology is defined by the firms
production function.
Industry

 Industry is a group of related firms.

 The relationship between the firms may be

either based upon product or process

criterion, e.g. dairy industry or food
processing industry etc.
 The concept of industry is helpful to

government and businessmen to formulate

their policies.
Types of industry

 The activities which are undertaken to

produce, convert, extract and fabricate raw
materials into finished goods are termed as
industries. It is the process where goods are
made usable and consumable. There are four
different types of industries. These are:
a) Genetic Industry
b) Extractive Industry
c) Manufacturing Industries
d) Construction Industry
Cont…
 a) Genetic Industry: It involves activities in reproducing and multiplying certain
species of plants and animals for the sake of earning profit from their sale. Fish
culture, cattle breeding, goatery and piggery are included in genetic industries.
 b) Extractive Industry: The industries engaged with the discovery or extracting

natural resources like minerals soil, water and forests are called extractive
industries. Mining, agriculture and fishing are best examples of extractive
industries.
 c) Manufacturing Industries: The industries engaged in the conversion of raw

material into finished products are called manufacturing industries. Cotton

textile, sugar, iron and steel are the best examples of manufacturing industries.
 d) Construction Industry: The industries in the construction of infrastructure

like building, dams, roads, bridges and canals are called construction industries
Reference / Reading Material
 http://ecoursesonline.iasri.res.in/mod/page/
view.php?id=4413
Thank You