Concept of firm and industry
In economics, market refers to a mechanism for determining the price of the goods and services and their transaction. The price determination is the most important part of the production.
Microeconomics also focuses on the determination of price. Therefore, it is also known as price theory. A firm produces the output with the purpose of selling in the market. But it has to decide what price to charge on the per unit output and how much to sell at that price. Therefore, the study of the equilibrium of a firm using TR-TC approach and MR-MC approach helps to determine price and output under perfect competition and monopoly.
Concept of firm and industry:-
1. Concept of the firm :-
A firm is an independent unit producing goods and services for sale. It is also defined as a single unit of an industry.
According to P.A. Samuelson and W. D. Nordhaus, “ A firm is a basic private producing unit in an economy. It hires labor, rents or owns capital and land and share goods and services. ”
Thus, a firm is a single unit of an industry producing goods and services with the objective of maximizing the profit.
2. Concept of an industry:-
In general sense, industry means the economic activity concerned with the processing of raw materials and manufacturing of goods. But in economics, it is defined as a group of firms producing homogeneous goods or services.
According to P. A. Samuelson and W. D. Nordhaus, “ Industry is a group of firms producing similar or identical products. ”
Thus, an industry is a group of manufacturers that produce a particular kind of goods or services.