A firm is a technical unit engaged in the production of goods/services and sale of them In other words, their activity is to transform inputs into outputs and or distribute such outputs.
For economists, the term, 'production' has a broad meaning. It includes tangible as well as intangible goods. Therefore, activities like transporting, storage and packaging even trading or service like health, banking, insurance and other service rendered for a fee/payment are all treated as production activities.
The entrepreneur (owner/manager) of the firm decides what to produce, insomuch to produce and how one or more goods will be produced. His decisions my yield gains (profits) or result in losses for him. The result will be a profit if the difference between his revenue from the sale of outputs and the cost of his inputs is positive; a loss if this difference is negative.
In what follows, let us try to understand some basic concepts like production function, its nature, productivity curve and isoquants and then proceed to derive alternative modes of optimizing behaviour.
No comments:
Post a Comment