FIRM: This is an organization/establishment owned by one or more persons who are engaged in productive activities of any kind with a motive of making profits.


This means the same thing as scale of production. But there are some factors (dis-economies) that influence the size of a firm and its establishment which depends on:

  1. The size of the demand for the firm’s product.
  2. The increasing cost and falling price.
  3. The availability of natural resource/raw materials.
  4. The level of education of the labour force
  5. The availability of capital to the entrepreneur.
  6. The managerial ability of the entrepreneur.
  7. The increasing cost and complexity of the organization.

      Note that there are some advantages derived from the increasing size of firms. These advantages are referred to as the “Economies of scale” and they include:(1) Technical Economies (2) Administrative economies (3)financial economies (4) Marketing economies (5) Research economies (6) Welfare Economies.

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