Factors Affecting Optimum Firm – With Example And Diagram

Factors Affecting Optimum Firm

A firm secures large scale economies with the expansion of its size of production. As a result the firm produces with minimum costs. But it will be able to secure economies only up to a particular stage. Diminishing returns arise after a particular stage. When Diminishing returns arise, the dis-economies of a firm outweigh the economies. Cost of production increases due to the difficulty in management and co-ordination. So the firm expands its production until it receives increasing returns to scale. It has to stop production at that stage of …

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Principle Of Least Cost Combination | Principle of Substitution

The main aim of a producer is to continue production activities with least costs. For this purpose, he combines different factors of production in such a way that the costs incurred for hiring their services are minimum. He continues his efforts in this regard until he arrives at the least cost combination of factors. In order to arrive at the least cost combination, the producer follows the principle of equi-marginal returns or the principle of substitution. He makes a comparison between the marginal productivity of different factors. He substitutes that …

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Law of Returns To Scale : Increasing Constant Decreasing Returns To Scale

Law of Returns To Scale Increasing Constant And Decreasing Returns To Scale

Law of Returns to scale The law of variable proportions is an important law in Economics. It describes how production can be increased with a constant factor while changing the proportions of the remaining factors. On the other hand, if we increase the proportion of all the factors and combine them in the same proportion, we get increasing, constant and diminishing returns one after another. This is known as returns to scale and the law explains the fact is known as the Law of Returns To Scale. In other words …

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The Law Of Increasing Returns In Economics – A Complete Note

importance of law of diminishing returns | law of increasing returns

Law Of Increasing Returns In Economics: Increasing Returns and decreasing returns are two important stages in Law of Variable Proportions. Production can be increased either by changing all factors of production or by keeping one factor fixed while changing the proportion of the remaining factors. The classical economists and Marshall (a neoclassical economist) viewed that Law of Diminishing Returns is applicable to agriculture. On the other hand, the modern economists described that the Law of Variable Proportions is applicable in every field of production. They viewed the Law of Diminishing …

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The Law of Diminishing Returns | Assumptions | Importance | Application

importance of law of diminishing returns | law of increasing returns

Production in agriculture or industry is possible due to the employment of the factors of production. The quantity of production of a commodity can be increased either by increasing the quantity of factors of production or by changing the proportions of the factors of production. Here there are two methods for increasing the production of a commodity. They are 1 ) increasing the production by keeping some factors constant while changing the other factors 2) Increasing the production by increasing all the factors. The Law of Variable Proportions (also known …

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Wage Fund Theory of Wages And Its Criticism

The Wage Fund theory was putforth by Adamsmith. Later this theory was developed by J. S. Mill. According to this theory, there is a wage fund in every country. This fund is of a fixed size. The wages to the workers are paid out of this fund. The average wage can be calculated by dividing the wage fund by the number of workers. Wage rate = Wage fund / No. of workers Since the wage fund is fixed, the average wage is determined by the number o f workers in …

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Advantages And Disadvantages Of Machines In Industries

Modern age is Mechanical age. In fact Machinery began to dominate man-power in productive affairs after the industrialization. Especially the improvements and innovations made in science and technology after First and Second world wars led to the adoption of latest technology and up-to-date Machinery. There are some advantages and disadvantages of Machinery, which are explained below. Advantages Of Machines In Industries 1. Predominance over Nature: Machines play an important role in getting control over the nature. Before the invention of machines, Man completely depended on the Nature for his day-to-day …

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Advantages And Disadvantages of Rationalisation In Business

Advantages And Disadvantages of Rationalisation In Business

Rationalisation In Business Rationalisation is an important feature of large scale production. It implies the elimination of all kinds of wastes and diseconomies in the methods of production. It aims at the achievement of maximum economies in production. Professor Florence defined rationalisation in business as elimination of waste and inefficiency in the industry by the combined efforts of the industry. Rationalisation in business industries can be introduced  by adopting scientific methods. Objectives of Rationalisation In Business 1) Securing maximum labor efficiency with minimum efforts. 2) Elimination of waste in the utilization …

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Advantages And Disadvantages Of Localization Of Industries

factors affecting location of industries | localization of industries

As we know, several factors govern the location of an Industry. But we have to remember that these factors are dynamic in nature. We can’t say that an industry will always remain in a particular place. Availability of new raw-materials, improvement in technology, development of new areas etc. influence the localization of industries. There are several advantages and disadvantages in the concentration or localization of industries. They are mentioned as below. First we are going through the Advantages of Localization Of Industries. Advantages of Concentration or Localization Of Industries 1. …

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13 Factors Affecting Location Of Industries

factors affecting location of industries | localization of industries

The location of several firms producing a commodity in a particular place or region is known as localization or concentration or simply location of industries. Areas or Regions also specialize in the production of a good. Localization or location of industries is also described as Concentration of industries or Geographical division of labor. In India the textile industry in Maharashtra, the sugar industry in Uttar Pradesh, the Jute industry in West Bengal etc., are some of the examples concentration or location of industries. 13 Factors Affecting Location Of Industries 1. …

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