Meaning of a firm and industry and factors that determine kind of goods and services to produce.
Size and Location of a Firm.Meaning of a firm and industry.- A firm is a business organization under one management and one control. Examples include Bata shoe, Banks.- An industry refers to a group of competing firmswhich produce related products, e.g. Petroleum industry has different petrol stations owned by different entities.Decision on what goods and services to produce.- Several factors influence the decision on what goods and services to produce. These include:- Consumer preference – A firm should produce what the consumer prefers in line with their tastes.- Government policy – The government may encourage production of some goods in the country by giving subsidiaries.- Availability of factors of production – This include land, labour, capital and entrepreneurship.-Profitability of the venture – Production will be increased if the product is profitable.-Level of competition – Business persons preferbusinesses that do not have a lot of competition.-Available technology – Availability of technology for production of goods will determine the goods produced.- Environmental issues – The business activities are not supposed to affect the environment negatively.- Economic factors – the general state of the economy like inflation, tax rate, population size, wages and salaries may affect a firm hence determining what to produce.